================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                   ---------------------------------------------

                                    FORM 10-K
(Mark One)
( X)  Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange
      Act of 1934. 

For the Fiscal Year Ended: December 31, 1998
                                       or
(  )  Transition  Report  Pursuant  to Section 13 or 15(d) of The  Securities
      Exchange Act of 1934.


For the transition period from         to

                       Commission File Number: 0-27280
               ---------------------------------------------

                              META Group, Inc.
           (Exact name of registrant as specified in its charter)

         Delaware                                              06-0971675
     -----------------------------                       -----------------------
   (State or other jurisdiction of                          (I.R.S. Employer
    incorporation or organization)                           Identification No.)

    208 Harbor Drive, Stamford, Connecticut                     06912-0061 
    ---------------------------------------              -----------------------
   (Address of principal executive offices)                     (Zip Code)

       Registrant's telephone number, including area code: (203) 973-6700

Securities registered pursuant to Section 12(b) of the Act:   None

Securities registered pursuant to Section 12(g) of the Act:

                        Common Stock, $.01 par value
                        ----------------------------
                              (Title of class)

Indicate  by check  mark  whether  the  registrant:  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes (X)  No (  )

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K . ( )

The  aggregate  market  value of the voting stock held by  nonaffiliates  of the
registrant  as of March 22, 1999 (based on the closing price as quoted by Nasdaq
National Market as of such date) was $178,871,524.

As of March 22, 1999,  11,930,846  shares of the registrant's  common stock were
outstanding.

                     DOCUMENTS INCORPORATED BY REFERENCE

Portions of the  Company's  Proxy  Statement  relating to the  Company's  Annual
Meeting of Stockholders to be held on May 20, 1999 are incorporated by reference
into Part III hereof.
================================================================================
<PAGE> 2
                                                             
                              PART I

ITEM 1.   BUSINESS

General

         META Group,  Inc. ("META Group") and its subsidiary, The Sentry Group,
Inc. ("Sentry"), collectively, the "Company" is an independent market assessment
company   providing   research   and  analysis  of   developments,   trends  and
organizational   issues  relating   to  the  computer  hardware,  software,
communications and related information  technology ("IT") industries to IT users
and vendors. IT user organizations utilize META Group's research,  analysis and
recommendations  to develop  and employ  cost-effective  and  revenue  enhancing
strategies for selecting and  implementing  timely IT solutions and for aligning
these solutions with business  priorities.  IT vendors use META Group's services
for help in product positioning,  marketing and market planning,  as well as for
internal IT decision making.

         META Group offers clients annual subscriptions to 14 different research
services  ("Continuous  Services") as part of its INsights product family. These
services  are focused on specific  areas of IT, IT issues  related to a specific
vertical  market,  or  specific  needs  of  those  within  the IT  organization.
Recommendations  to clients are based on  projections  and analyses of important
industry trends, experiences of other companies,  events and announcements,  key
issues  and  business  practices,  as well  as new  technologies,  products  and
services.

         The  Company  offers   consulting   services  through  its  META  Group
Consulting  division ("MGC") as part of its INitiatives product family. 
A significant portion of MGC clients are also Continuous  Services  subscribers.
The acquisition by the Company of Sentry in October 1998 significantly  expanded
MGC's business value consulting practice, and compliments the existing sourcing,
benchmarking,  technology application, e-commerce and other consulting practices
within MGC. The Company also offers a variety of targeted  publications  as part
of its  INforum  product  family.  See  "Business  -  Products  and  Services  -
INitiatives: META Group Consulting" and "Management's Discussion and Analysis of
Financial  Condition and Results of Operations - Certain Factors That May Affect
Future  Results - Risk of  Failure to  Integrate  Recent  Acquisition  and Risks
Associated with Potential Acquisitions."

         META  Group  targets  as  its  clients   substantial   commercial   and
governmental  users of IT, as well as IT vendors.  As of December 31, 1998,  the
Company had over 4,000 subscribers in approximately 1,750 client  organizations,
including  42% of the  Fortune  500  companies,  67% of the top 100  Fortune 500
companies and 93% of the top 15 Fortune 500 companies. During each of 1998, 1997
and  1996,  approximately  75% of  META  Group's  clients  renewed  one or  more
subscriptions.

         From time to time,  information  provided by the Company or  statements
made by its employees may contain  "forward-looking"  information  which involve
risks and  uncertainties.  In  particular,  the  statements  set forth under the
heading "The META Group Solution"  below  regarding the Company's  objectives to
expand the range of clients it serves,  further  penetrate  its existing  client
base, extend its product line and broaden the scope of its services are "forward
looking"  statements.  The Company's actual results may vary  significantly from
<PAGE>  3
those  stated in any  forward-looking  statements.  Factors  that may cause such
differences  include,  but  are  not  limited  to,  difficulties  in the  timely
adjustment  and/or expansion of the Company's product offerings to encompass new
technologies  and market demands,  difficulties in developing,  acquiring and/or
integrating  new product  offerings,  difficulties  in attracting  and retaining
qualified  personnel,  competition,  changes in the mix between  the  Continuous
Services  business  and the  Consulting  Services  business,  changes in the mix
between domestic and  international  business,  changes in the rates of customer
renewals,  difficulties  in gaining  entry into new  markets  for the  Company's
products and services and limitations on financial and other resources  required
to engage  in  product  development  and sales  and  marketing  activities.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations--Year  2000 Readiness  Disclosure"  and  "--Certain  Factors That May
Affect  Future  Results" for a  discussion  of certain  factors  which may cause
actual results to vary  significantly  from those stated in any  forward-looking
statement.

         Specific   comparative   financial   information   may  be   found   in
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" and in the notes to the consolidated financial statements.

         META GROUP(R) is a registered  trademark of the Company. The META GROUP
logo(TM),  META(TM),  META DELTAS(TM),  META FAX(TM),  META FLASH(TM), and META
TRENDS(TM) are trademarks of the Company. This report also includes  trademarks
and trade names of companies other than META Group.

Industry Background

         Businesses  and  other   organizations   remain  dependent  on  IT  for
competitive   success,   which  has  led  to  sustained   growth  in  IT-related
expenditures.  This market  growth is being  driven by many  factors,  including
intensified  domestic  and  global  competition,  the  Internet  and  electronic
commerce,  large-scale  migration from legacy  mainframe  systems to distributed
architectures,  the accelerating pace of technological change, shortened product
life-cycles,  outsourcing and widespread  business  process  re-engineering  and
corporate downsizing.

         At the same time, the decision-making process involved in the planning,
selection and  implementation of IT solutions is growing more complex.  Prior to
the emergence of open systems and  distributed  computing,  organizations  faced
easier technology  choices.  Traditionally,  IT managers would simply purchase a
vertically  integrated  solution (hardware,  operating system,  applications and
services) from one of the large systems vendors.  Today, IT decision-makers must
evaluate a variety of new and rapidly  evolving  products from multiple  vendors
and consider the  interoperability  of these  products with one another and with
existing legacy systems.

         As IT has become more entwined with day-to-day  business operations and
strategic  planning,  a wider range of individuals are  participating  in the IT
decision-making  process. With the shift to distributed  computing,  IT decision
making has spread to individual business units. Furthermore, as IT supports more
business-critical   functions   and   businesses   increasingly   interact  with
customer/suppliers  through the  Internet/World  Wide Web, IT decision-makers at
all levels are becoming key participants in the planning and  implementation  of
<PAGE>  4
business  decisions  and are often being called upon to be strategic  drivers of
business and technology innovation. As IT assumes a more business-critical role,
senior  executives of organizations  are compelled to take a more active role in
IT planning and decision making.

         As a result of these trends, there is an increasing need for a level of
IT guidance that often cannot be effectively supported by the internal resources
of a single  organization.  Organizations are more frequently turning to outside
sources for help with strategic and tactical  advice in planning,  selecting and
implementing IT; however, historically, available solutions have had significant
limitations. Software and equipment vendors generally offer advice biased toward
their own  products  or  services,  while  often  understating  interoperability
issues.  Many professional  service firms and  implementation  companies provide
technical  advice,  but they have  incentives to promote  solutions that require
their services and often have  purchasing  and  cooperative  relationships  with
particular hardware and software vendors. Some independent market research firms
provide  vendor-neutral  advice,  but most target technology vendors rather than
the user  community.  Those market research firms that do target users typically
do not offer  advice  over a full range of  technology  offerings.  As a result,
there  is  a  need  for  vendor-neutral,  user-focused,  broad-based  IT  market
research,  coupled with  personalized  advice within the specific  context of an
organization's business environment and IT requirements.

The META Group Solution

         The Company  addresses the growing demand for user-focused  guidance by
providing  vendor-neutral  IT  research,  analysis  and  advice  to  substantial
commercial and  governmental  users of IT. META Group services are also utilized
by IT vendors for help in product positioning,  marketing and market planning as
well as for internal IT decision making.  META Group Continuous  Services assist
clients in making more  informed,  timely and  cost-effective  decisions  in the
context of the clients'  business and technology  environments.  Each Continuous
Service is highly  focused on enhancing  the client's  ability to reduce  and/or
contain the cost of IT,  reduce  risk,  assess  vendor  business  practices  and
strategies, evaluate products and technologies,  negotiate with vendors, develop
financial strategies and formulate IT architectures and strategic plans.

         META Group differentiates its services from those offered by most other
IT research firms by delivering IT industry coverage through more  comprehensive
and  integrated  service  segments,  a higher  level of  personal  service and a
greater  emphasis  on  client/analyst  interaction.  To  provide  this  level of
service,  the Company maintains a client/analyst ratio no higher than 50-to-1 in
each of its service segments.

         The  Company's  research is designed to alert  clients to the sometimes
subtle and  unforeseen  opportunities  and risks inherent in complex IT business
decisions.  Although  META Group  research  contains  concrete  conclusions  and
recommendations,  a client seeking to understand the complex IT issues addressed
in written  research  often  requires  further  explanation  and analysis in the
context  of the  client's  unique  business  environment  and  IT  requirements.
Accordingly, all META Group Continuous Service clients have direct access to the
Company's  analysts,   who  adapt  the  Company's   published   conclusions  and
recommendations to the client's specific IT environment. META Group analysts are
available to clients through direct telephone consultations,  customized on-site
<PAGE>  5
and regional executive  briefings and in-depth quarterly and annual conferences,
as well as teleconferences addressing significant current IT developments.

         META Group believes its proactive  involvement in clients' specific IT
problem solving situations  enables it to provide actionable advice. META Group
analysts  have  real-time  access to a broad  base of  current  user  experience
spanning vertical industries and related technologies. This first-hand practical
knowledge  is  disseminated  throughout  the Company at weekly  meetings of META
Group's  entire  research  staff.  As a result  of this  interaction  and  broad
knowledge  base,  META Group  analysts  deliver more  informed  conclusions  and
recommendations.  META Group  believes that its  interactive  approach  provides
significant value to senior management and IT decision-makers by enhancing their
ability to make sound, practical and cost-effective decisions.

         META Group's  objective is to leverage  its  reputation,  comprehensive
research  model,   knowledge  base,  customer  relationships  and  domestic  and
international  sales  network to expand the range of clients it serves,  further
penetrate  its  existing  client  base,  extend its product line and broaden the
scope of its services.

Products and Services

         META Group's  services and  products  are designed to  complement  each
other and provide flexible access to the industry's  foremost market  assessment
and analytical expertise in the following categories:

         o CONTINUOUS SERVICES (marketed under the product name INsights)
         o CONSULTING (marketed under the product name INitiatives)
         o PUBLICATIONS (marketed under the product name INforum)

INsights:  Continuous Services

         INsights is META Group's product family of Continuous Services offering
actionable research, unlimited analyst interaction,  and on-site consultation
with META Group  analysts  when  clients need to further  understand  industry
trends, vendor assessments, and the business application of technology solutions
- applying analyst insight and research to their specific set of decision-making
opportunities. These services have been  developed to meet the varied needs of
client organizations: technology-focused services (infrastructure, architecture,
and  applications); industry-focused  services  (specific to industries such as
energy, insurance, and healthcare); and senior executive-focused services (such
as META Group's Executive Directions service).

         META Group  believes  its  Continuous  Services  provide  comprehensive
coverage of virtually all relevant IT and business  related  issues faced by its
clients.  META Group applies a consistent approach to all Continuous Services by
offering a high level of personal  service  with an  emphasis on  client/analyst
interaction.  All META Group  Continuous  Services clients have direct access to
the Company's analysts as advisors to adapt the Company's published  conclusions
and  recommendations  to the  client's  specific  IT  requirements.  Proactively
contacting clients on a regular basis, META Group analysts apply their knowledge
<PAGE>  6
base of  product  information  and user  experience  to respond to the unique IT
situation of each client with incontext, definitive advice and recommendations.

         The list  prices  for the  Company's  Continuous  Services  range  from
$23,000 to $50,000,  and are subject to discounts  based on a number of factors,
including  the number of  Continuous  Services  subscribed  to by a client.  The
Company's average selling price for a Continuous  Service was $17,600,  $16,600,
and $15,400 for the years ended December 31, 1998, 1997, and 1996, respectively.

         The following  deliverables,  which involve the direct participation of
META Group  research  analysts,  typically are provided to  subscribers  to META
Group's Continuous Services as an integral part of such services:

         o Telephone Consultations afford each subscriber the unlimited
           opportunity to discuss specific issues with META Group analysts.

         o Half-day  Briefings are held at META Group headquarters or at client
           sites and address client-specific issues.

         o Strategic Plan Reviews  provide META Group analysis and evaluation
           of clients' strategic plans.

         o Regional Executive  Briefings  are conducted by each service.
           These  half-day user  roundtables  focus on key issues and are
           held in major cities throughout the year.

         o  META Trend  Teleconferences are held quarterly by each service
            to provide an  in-depth  analysis  of between  two and four of
            that  service's  annual  "META  Trends"  (that  is,  long-term
            projections of major industry  issues and directions that META
            Group believes will impact users, vendors and the IT market).

         o  Key Event  Teleconferences  enable  clients to  participate in
            discussions  with META Group  analysts and are generally  held
            following key industry events,  such as major announcements or
            trade shows.

         o  META Group  Conferences  address a broad range of tactical and
            strategic  issues  relevant  to each  service.  At  least  one
            conference  per service is  conducted  annually.  A conference
            covering industry-wide issues is also held annually.

         o  Written Research: Each subscriber to a META Group Continuous Service
            receives one or more of the following written materials:

            o  META  Deltas  consist of three to four  analytical  briefs, 
               published monthly,  that  deliver  analysis of major events, 
               issues,  vendor products and strategies, technology and other
               pertinent matters.

            o  META  Faxes  are  concise  faxed  summaries  of  META
               Group's weekly  research  meeting,  at which industry
               events are reviewed and analyzed.
<PAGE>7
            o  META Trends is an annual publication  featuring three
               to five year  projections of  significant  issues and
               developments that will affect IT users and vendors.

           o   META Flash is a faxed bulletin containing analysis of
               key industry events or announcements which META Group
               deems to be of extraordinary importance.

         META Group  research  is  available  in print,  as well as in the media
below. A rolling three years of research can be searched by service,  topic,  or
keyword.

         o        Extranet or Intranet

         o        Internet

         o        Lotus Notes

         o        CD-ROM

The following is a description of META Group's Continuous Services:

         Application Delivery Strategies (ADS) assists organizations in aligning
IT resources  with  business  initiatives  through the use of advanced  software
technologies. Primary areas of focus include client/server application packages,
enterprise and departmental  application  infrastructures,  systems integrators,
data  warehousing,   DSS/OLAP,   development  tools,  and  process   improvement
strategies. Practical examples include integrating customer management processes
across the enterprise,  revitalizing core business practices, integrating legacy
applications  with data  warehousing  and Internet  topologies,  and  supporting
market-driven applications within cost-effective IT frameworks.

         Electronic Business  Strategies (EBS) provides early  identification of
high-impact  technologies that support business  transformation  strategies.  It
encompasses a wide range of both IT and business issues.  Service  offerings are
focused on electronic commerce,  objects (emphasizing  business-process risk and
object oriented infrastructure),  collaborative technologies,  workflow products
and "new" media,  including  documents,  images and  multimedia.  Analysts  also
assist in creating  cross-functional,  customer-focused  organizations;  guiding
organizations through required business transformations;  and assessing external
resources such as management  consultants,  systems integrators and providers of
change-management services.

         Enterprise Architecture Strategies (EAS) focuses on the needs of senior
level  IT  professionals  and  the  fundamentals  of  planning,   designing  and
implementing  an IT  architecture  that supports the company's  growth  strategy
while allowing for a quick  response to industry  changes and  advancements. By
<PAGE>8
identifying  the core issues that link  business  function to IT  strategy,  EAS
helps  clients to build an  adaptive  IT  foundation  that  sustains a company's
competitive advantage.

         Enterprise Data Center Strategies (EDCS) delivers guidance critical for
integrating  heterogeneous vendors,  platforms and applications into a cohesive,
cost-effective  enterprise data center.  Clients benefit from in-depth  analysis
and insight into the management, organization, operational and technical factors

behind  evolving  enterprise  architectures,  logical data centers,  high-volume
transaction  processing  and  database  systems,  hardware  and  software  asset
management.  Particular  areas of focus  include  migration  and  implementation
strategies, parallel sysplex, Year 2000 compliance, vendor analysis and business
practices, and negotiation strategies.

         Global  Networking   Strategies  (GNS)  addresses  the  management  and
technical issues raised by changes in corporate network architectures.  Analysts
provide insight into emerging trends in technology, regulation and network-based
applications.   Primary  areas  of  concentration   include   corporate  network
architectures  and  services,  bandwidth  management,  connectivity  beyond  the
enterprise,  integrated  network and systems  management,  voice  switching  and
processing,  worldwide regulatory  environments,  wireless  communications,  and
network security. Client benefits include enhanced strategic planning,  improved
network  performance,  better network  outsourcing  decisions and more effective
vendor evaluation.

         Executive  Directions  (ED) provides a forum for senior IT and business
executives to discuss operational and organizational  challenges and experiences
on IT related  topics.  Membership-directed  research  topics are  discussed  at
regional  and  national  meetings  and  published  in monthly  research  papers.
Customized  on-site briefings and one-day planning sessions are also provided to
focus on client and industry issues.

         Open  Computing  &  Server  Strategies  (OCSS)  represents  a  valuable
resource for  organizations  seeking to support  business-critical  applications
with scaleable,  high-performance  open servers.  Research provides interactive,
ongoing   assistance  with  the  entire  spectrum  of  issues   associated  with
establishing and maintaining open system - architecture  planning,  rightsizing,
data warehousing,  relational database  management systems,  storage subsystems,
and identification and evaluation of key vendor partners.

         IT  Performance  Engineering  &  Measurement  Strategies  (PEMS) offers
detailed  benchmarking in combination with ongoing software analysis required to
quantify  the  value  of  client  IT  investment   and  capitalize  on  specific
opportunities for improvement.

         Service  Management  Strategies  (SMS)  delivers  research and analysis
focused on the management of shared computing  infrastructures and applications.
Primary areas of coverage include networked systems management, customer-support
operations and outsourcing (including  feasibility studies,  vendor negotiation,
implementation  schedules and  management of service  providers).  In all cases,
analysts  pay  particular  attention  to  the  organizational,   financial,  and
management  implications  of IT's  increasing  role  as an  internal  vendor  of
services.

         Workgroup Computing  Strategies (WCS) provides research and analysis to
assist   organizations   in   deploying   client/server   and   intranet-related
<PAGE>  9
technologies  and  applications.  Areas of focus include  network  computing and
Web-based  applications,  groupware  and  collaborative  computing,  mobile  and
telecommunting,  and total cost of ownership.  Additional  coverage  includes PC
hardware and system software (client,  network and server),  Web development and
management,  and IT  organizational  issues.  Emphasis is given to the impact of
end-user and departmental requirements on systems developed and deployed by IT.

         INfusion: 
         Supplementing  the foregoing,  during 1998 the Company introduced
INfusion,  a program that  combines  offerings  across META Group's  Continuous 
Services to meet the dynamic needs of an enterprise through focused,  topical 
programs and workshops. These programs have developed as a result of  
organizations' collective need to rapidly understand how to implement complex 
technology-based  solutions,  while meeting the demands of diverse business 
units that are evolving at a rapid pace.

         META  Group's  INfusion   programs  benefit   organizations   that  are
challenged  with such  issues as defining a flexible  architecture,  building an
adaptive  infrastructure,  and  measuring  the  business  performance  of  an IT
organization  as it supports both the corporate  technology  infrastructure  and
applications,  as well as meeting  business unit  requirements.  These  programs
build on the  business-focused  analysis  from  the  INsights  services  by also
offering  interactive  workshops  that  focus  on  methodology  and  skill-based
training to successfully manage a specific business-critical topic.

         Continuous Services for Vertical Industries:

o        Insurance  Information  Strategies (IIS) delivers guidance critical for
         managing IT and information in the insurance industry,  with particular
         emphasis  on the  challenges  faced  by  insurance  companies  as  they
         transition from traditional underwriters analyzing risk management into
         full  financial  services  providers  requiring  superior IT systems to
         handle increased customer expectations and competition.

o        Healthcare  Information Technology Strategies (HITS) delivers targeted
         research and insight to help IT healthcare professionals  successfully
         implement long-term IT strategies in a changing regulatory environment.
         Specific areas of research  include:  legacy system  transition, 
         decision  support, communications services and other supporting
         technologies.

o        Energy  Information  Strategies (EIS) focuses on the IT requirements of
         energy  industry  participants  preparing to compete in a  de-regulated
         environment   of  customer   choice  where  the   efficient   purchase,
         production,  transmission and management of energy requires the use and
         understanding of complex technology systems.

o        Retail & Distribution  Information  Strategies (RDIS) provides research
         and analysis related to the business issues and technology  trends most
         relevant to business and IT executives within the retail industry.
<PAGE>10
INitiatives: META Group Consulting

         INitiatives  is  META  Group's  product  family   providing   strategic
consulting  through  a  customized   approach  to  each  client's  business  and
technology  issues.  MGC  clients  use  INitiatives  offerings  when  they  need
assistance  in  confronting  such  issues  as  sourcing   strategies,   customer
management, infrastructure vendor assessments, application portfolio assessment,
and the  impact  that  the  effective  use of  business  intelligence  has on an
enterprise,  priced on a per project basis.  MGC also provides  benchmarking and
best practices analyses of technology operations environments.

         As  organizations  continue to evaluate core  competencies and look for
cost savings  through the selective use of  outsourcing,  IT  organizations  are
increasingly   being  positioned  as  internal   service   entities   satisfying

line-of-business  ("LOB") "clients." As a result,  today's IT executive is under
pressure  to plan a  flexible  and  cost-effective  IT  architecture  addressing
tomorrow's  business  environment,  while  remaining  responsive to changing LOB
requirements.  MGC  combines  technological  expertise  and  extensive  research
resources  to assist  companies  in  developing  and  implementing  strategic IT
architectures. MGC leverages META Group's Continuous Service research and client
relationships  to understand user issues and technology  trends,  drawing on the
expertise of META Group analysts in all Continuous  Services areas. MGC services
include  planning  foundation  analysis,  business and  technology  requirements
analysis,  strategy development,  outsourcing strategies,  Year 2000 compliance,
data warehouse migration planning,  application procurement strategies, and data
center benchmarking.

         The acquisition by the Company of Sentry in October 1998  significantly
expanded the Company's business value consulting practice,  and complimented the
existing sourcing,  benchmarking,  technology application,  e-commerce and other
consulting  practices within MGC. See  "Management's  Discussion and Analysis of
Financial  Condition and Results of Operations - Certain Factors That May Affect
Future  Results  Risk of  Failure  to  Integrate  Recent  Acquisition  and Risks
Associated with Potential Acquisitions."

         The  acquisition  by the Company of certain assets of The Verity Group,
Inc.  in late  1997 has  enabled  the  Company  to offer a  Customer  Management
Strategies practice to offer helpdesk and callcenter consulting and benchmarking
services to its clients. 

         In 1997, the Company formed a joint venture with SRI  International  to
deliver  thought-leading   research,   methods,  metrics  and  tools  to  senior
management of global 2000 companies  planning for the future.  See "Management's
Discussion  and  Analysis of  Financial  Condition  and Results of  Operations -
Liquidity and Capital Resources."

INforum: Publications

         INforum  is  META  Group's  product  family  of  publications  offering
in-depth  analysis  of such  issues  as  human  capital  management, electronic
<PAGE> 11
commerce, data warehousing and Year 2000. These publications help clients gain a
more  thorough  understanding  of a single  business  or IT  issue by  providing
information-based research.

         In February  1996, the Company  entered into an exclusive  distribution
agreement with  Computerwire  (formerly known as APT Data Group,  plc), a London
based  publisher of magazines,  newsletters,  and product  review  bulletins for
users and suppliers of information technology.  Under the agreement, the Company
has the  exclusive  right to co-market  and  distribute  four of  Computerwire's
Software Tools Bulletins in the United States,  Canada, and Latin America. These
bulletins  provide  monthly  product  and  category  reviews  in  the  areas  of
client/server development, data warehousing, distributed systems management, and
object oriented development.

         In April  1996,  the Company  entered  into an  exclusive  distribution
agreement  with CXP  International,  S.A., a Paris based company  specialized in
gathering,  analyzing,  publishing,  marketing and selling technical evaluations
regarding  computer and  telecommunication  software.  Under the agreement,  the
Company acts as CXP's distributor to translate to English,  promote,  market and
sell CXP's  proprietary  publications,  Software Product Expertise (SPEX) in the
United  States,  Canada and Mexico.  These  publications  provide  comprehensive
software  evaluations  with  side-by-side  product  comparisons to assist in the
software product decision making process.

         The  successful  assimilation,  marketing  and sale of new products are
subject to certain risks and  uncertainties.  See  "Management's  Discussion and
Analysis of Financial Condition and Results of Operations - Certain Factors That
May Affect Future Results - Risks Associated With New Product Development."

Research and Analysis

         The Company  employs a  consistent,  disciplined  research and analysis
methodology across the Company's  Continuous  Services.  Each Continuous Service
has a  Service  Director  who is  responsible  for  implementing  the  Company's
research and analysis methodology in that service.  The development  methodology
consists of an iterative process of research, analysis,  hypothesis and testing.
Analysts conduct  extensive  primary  research,  working with the Company's user
client base,  surveying  vendors and contacting other sources.  These activities
are  supplemented   with  searches  of  numerous  trade,   financial  and  other
third-party  source  materials  compiled in the  Company's  resource  center.  A
meeting  of the  entire  META  Group  research  staff is held  weekly,  at which
findings are presented and scrutinized.  From this research,  analysts  identify
significant patterns and trends, develop assumptions, test hypotheses and arrive
at concrete  recommendations  and conclusions to provide to clients.  META Group
analyst  compensation is based in part on meeting monthly publishing  deadlines,
as well as proactive client contact.

         The knowledge and  experience of the Company's  analysts is critical to
the quality of the Company's  products and services.  To ensure  consistency  of
positions and analysis  across service  disciplines,  all META Group research is
reviewed by the Company's  Co-Research  Directors.  While  varying  opinions and
<PAGE> 12
philosophical contention among services and research disciplines are encouraged,
final positions and conclusions are consistent.  This practice  ensures that the
analytical  structure and  recommendations  presented in the Company's  research
better  enable  the  various  elements  of  client  organizations  to  formulate
integrated strategies based on coherent information and analysis.

Sales and Marketing

         META  Group uses a direct  sales  force  domestically  and a network of
local independent sales representative  organizations  internationally to market
and sell its Continuous  Services under the INsights and INfusion product family
names. The Company's  domestic direct sales force is comprised of 62 field sales
personnel  located  throughout  the United  States.  The  Company's  publication
products are sold  domestically by a separate  Inside Sales channel  totaling 22
tele-sales  professionals.   Internationally,  the  Company  currently  utilizes
independent sales  representative  organizations  selling  Continuous  Services,
Consulting and Publication  products in Canada,  Europe,  Far East, Middle East,
South America and South Africa.  Under the terms of the Company's  international
sales representative agreements, sales representative organizations are assigned
exclusive   territories   and   annual   quotas.   These   international   sales
representative organizations also perform selected client service functions, and
bill and  collect  revenues  attributable  to  international  clients.  The
Company  realizes   revenues  from  the   international   sales   representative
organizations  at rates of 40% to 60% of amounts  billed to those  clients.  See
"Management  Discussion  and  Analysis  of  Financial  Condition  and Results of
Operations - Certain  Factors That May Affect Future  Results - Risk  Associated
With International Operations" and Note 1 of notes to the consolidated financial
statements.

         As of December  31,  1998,  the Company had over 4,000  subscribers  in
approximately  1,750  client  organizations  worldwide,  and  no  single  client
accounted for more than 2% of the Company's revenues for the year ended December
31,  1998.  The  Company  does not  believe it is the  exclusive  provider of IT
research and advisory services to its clients.

         In March 1995, META Group entered into an exclusive  strategic alliance
agreement with First Albany Corporation  ("First Albany"),  a financial services
firm.  The agreement  provides for the  distribution  of the  Company's  written
research and analysis,  in its original  form or as  customized  and expanded by
First Albany, to First Albany's financial services customers, which include many
institutional  investors. The agreement restricts the Company from marketing its
services to any broker  dealer or sell-side  firm offering  services  similar to
those  offered by First  Albany.  The  Company is  permitted  to market and sell
Continuous  Services to First  Albany  buy-side  customers.  This  agreement  is
annually  renewable by First Albany,  subject to attainment of specified minimum
revenue targets.  The Company  recognized  $750,000,  $616,500,  and $425,000 in
revenues from this  arrangement in the years ended December 31, 1998,  1997, and
1996,  respectively.  George C.  McNamee,  a director  of the  Company,  is also
Chairman and Co-Chief Executive Officer of First Albany. See Note 11 of notes to
consolidated financial statements.
<PAGE> 13
Client Support

         META Group is committed to providing a high level of client  service as
defined by response time,  clarity of advice and quality of communication.  META
Group  analysts  respond to clients'  inquiries and concerns as they arise,  and
analyst  compensation  is  based  in  part on  client  inquiry  response  times.
Analysts'  regular  contact  with  clients  through   telephone   consultations,
briefings and conferences  also provides the Company with feedback which is used
in the enhancement of its services. In addition, the META Group research library
frequently performs supporting client-specific topical searches on particular IT
issues.  The Company  maintains a key issues database that  identifies  areas of
particular concern to clients and regularly uses customer  satisfaction  surveys
to refine and enhance the quality of the services it provides.

         The Company sells Continuous  Services  pursuant to renewable  one-year
subscription  agreements,  which are generally  paid in full at the start of the
subscription  period.  During each of 1998, 1997 and 1996,  approximately 75% of
the Company's client organizations  renewed one or more subscriptions.  However,
there can be no  assurance  that the Company  will be able to sustain its client
retention rates at historical levels. See "Management's  Discussion and Analysis
of Financial Condition and Results of Operations."

Competition

         The Company  experiences  competition in the market for IT research and
analysis  products  and  services  from other  independent  providers of similar
services, as well as the internal planning and marketing staffs of the Company's
current and prospective  clients.  The Company's  principal  direct  competitor,
Gartner  Group,  Inc.,  has  a  substantially   longer  operating  history,   is
significantly larger and has considerably greater financial resources and market
share than the  Company.  The Company also  competes  indirectly  against  other
information  providers,  including  electronic  and print  media  companies  and
consulting  firms. The Company's  indirect  competitors  could choose to compete
directly  against the Company in the future.  Many of the  Company's  direct and
indirect competitors have substantially greater financial, information gathering
and  marketing  resources  than the Company.  In addition,  although the Company
believes that it has established a significant  market  presence,  there are few
barriers to entry into the Company's  market,  and new competitors could readily
seek to compete against the Company in one or more market segments  addressed by
the Company's Continuous Services.  Increased competition could adversely affect
the Company's  operating  results  through  pricing  pressure and loss of market
share.  There can be no  assurance  that the Company will be able to continue to
compete successfully against existing or new competitors.

         The Company  believes  that the  principal  competitive  factors in its
industry are quality of research  and  analysis  applied in context of client IT
environments,  timely  delivery  of  relevant  information,  client  support and
responsiveness,  the ability to offer  products that meet changing  market needs
for  information  and  analysis,  and price.  The  Company  believes it competes
favorably with respect to each of these factors.
<PAGE> 14
Employees

         As of December 31, 1998, the Company employed 426 people, including 218
research  analysis  and  fulfillment   personnel  (including  159  analysts  and
consultants), 125 sales and marketing personnel and 83 administrative personnel.
Of these employees,  197 are located at the Company's  headquarters in Stamford,
Connecticut,  208 are located at other  domestic  facilities  and 20 are located
overseas.  None  of the  Company's  employees  is  represented  by a  collective
bargaining arrangement,  and the Company has experienced no work stoppages.  The
Company considers its relations with its employees to be good. All employees are
granted stock options upon hiring.

         The Company's  future  success  depends in large part on the ability to
continue to motivate and retain highly qualified employees, including management
personnel,  and to  attract  and  retain  a  significant  number  of  additional
qualified personnel,  including research analysts,  consultants, sales personnel
and  product  development  and  operations  staff.   Competition  for  qualified
personnel in the Company's  industry is intense,  and many of the companies with
which META Group competes for qualified personnel, including Gartner Group, have
substantially   greater   financial  and  other   resources  than  the  Company.
Furthermore,  competition for qualified personnel can be expected to become more
intense as  competition  in the Company's  industry  increases.  There can be no
assurance  that the  Company  will be able to  recruit,  retain  and  motivate a
sufficient number of qualified  personnel to compete  successfully.  The loss of
any of the Company's senior  management  personnel,  particularly  Dale Kutnick,
President,  Chief Executive  Officer and Co-Research  director of the Company or
any material  failure to recruit,  retain and  motivate a  sufficient  number of
qualified  personnel  would have a material  adverse effect on the Company.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations - Certain  Factors  That May Affect  Future  Results - Dependence  on
Ability to Attract and Retain  Qualified  Personnel"  and "-  Dependence  on Key
Personnel."

ITEM 2.  PROPERTIES

         The Company's  headquarters are located in approximately  78,000 square
feet of  office  space in  Stamford,  Connecticut.  This  facility  accommodates
research,  marketing, sales, customer support and corporate administration.  The
lease on this facility  expires in 2001. The Company also leases office space in
nine other  locations to support its  research,  sales and other  administrative
functions including Reston, VA, Burlingame, CA, and Westborough, MA. The Company
believes  that its existing  facilities  are adequate for its current  needs and
that additional facilities are available for lease to meet future needs.

ITEM 3.  LEGAL PROCEEDINGS

         The  Company is a party to  certain  legal  proceedings  arising in the
ordinary course of business.  However,  the Company  believes that none of these
proceedings  is  likely  to have a  material  adverse  effect  on the  Company's
business, results of operations or financial condition.
<PAGE> 15
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No  matters  were  submitted  to a vote of the  Company's  stockholders
during the fourth quarter of 1998.
<PAGE> 16
                                  PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The  Company's  Common  Stock has been  traded on the  Nasdaq  National
Market  under  the  symbol  "METG"  since  its  initial  public   offering  (the
"Offering")  at $12.00 per share on  December  1, 1995.  Prior to the  Offering,
there was no established public trading market for the Company's shares.

         On March 22, 1999, the closing price of the Company's  Common Stock was
$18.50,  as reported by the Nasdaq  National  Market.  On that date,  there were
approximately  156 holders of record of the Company's  Common Stock and at least
1,300  beneficial  holders,  based on  information  obtained  from the Company's
transfer agent.

         The  Company has never paid cash  dividends  on its Common  Stock.  Any
future declaration and payment of dividends will be subject to the discretion of
the  Company's  Board of Directors,  will be subject to applicable  law and will
depend upon the Company's results of operations,  earnings, financial condition,
contractual limitations,  cash requirements,  future prospects and other factors
deemed relevant by the Company's Board of Directors.

         On April 27, 1998,  the Board of  Directors  of the Company  declared a
three for two stock split effected through the issuance of a fifty percent stock
dividend payable on June 11, 1998 to shareholders of record on May 22, 1998. All
share and per share  amounts  affected by this split that are  contained in this
annual  report on Form 10-K have been  retroactively  adjusted  for all  periods
presented.

         The following  table reflects the range of high and low bid quotations,
as reported on the Nasdaq National Market,  for META Group Common Stock for each
quarter of the years ended December 31, 1998 and 1997.

<TABLE>
<CAPTION>

                                                         High           Low
                                                        -----          ------
<S>                                                   <C>              <C>       
1998
----
Fourth Quarter                                          $32.63          $19.00
Third Quarter                                           $33.75          $19.62
Second Quarter                                          $25.66          $20.31
First Quarter                                           $23.66          $14.91

1997:
-----
Fourth Quarter                                          $19.50          $12.83
Third Quarter                                           $16.75          $11.83
Second Quarter                                          $16.16          $10.33
First Quarter                                           $18.00          $10.83

</TABLE>

<PAGE> 17
ITEM 6.  SELECTED FINANCIAL DATA

         The  selected  financial  data  presented  below are  derived  from the
consolidated  financial  statements  of the  Company,  and  should  be  read  in
connection with those statements, which are included herein. All share and per
share amounts have been retroactively adjusted to reflect the three for two
split.

<TABLE>
<CAPTION>
                                                                  Year Ended December 31,
                                                   ----------------------------------------------------
                                                     1998       1997        1996       1995        1994
                                                     ----       ----        ----       ----        ----
                                                          (In thousands, except per share amounts)
<S>                                                <C>         <C>       <C>         <C>        <C>    
Statement of Operations Data:
Revenues:
     Continuous services                           $56,086     $41,805    $30,769     $22,334    $16,160
     Other, principally consulting
     and publications                               16,699       9,390      6,197       3,001      1,255
                                                   -------     -------    -------     -------   --------
           Total revenues                           72,785      51,195     36,966      25,335     17,415
                                                   -------     -------    -------     -------   --------
Operating expenses:
     Cost of services and fulfillment               35,098      24,602     18,908      14,515     11,073
     Selling and marketing                          16,702      12,477      8,797       6,329      6,680
     General and administrative                      6,753       5,006      3,728       2,180      1,949
     Depreciation and amortization                   1,894       1,501      1,086         676        441
                                                   -------     -------    --------    -------   --------
           Total operating expenses                 60,447      43,586     32,519      23,700     20,143
                                                   -------     -------    -------     -------   --------
Operating income (loss)                             12,338       7,609      4,447       1,635     (2,728)
                                                   -------     -------    -------     -------   --------

Other income (expense):
          Gain on sale of investment                                                      250
          Interest income                            2,621       2,138      1,909         217         16 
                                                   
        Interest expense                                                                  (19)       (66)
                                                   -------     -------    -------     -------     -------
        Total other income (expense)                 2,621       2,138      1,909         448        (50)
                                                   -------     -------    --------    -------    ------- 

Income (loss) before provision                     
     (benefit) for income tax                       14,959      9,747       6,356       2,083     (2,778)
Provision (benefit) for income tax                   6,174      3,980       2,730      (1,547)           
                                                   -------     -------    -------     -------    ------- 
Net income (loss)                                  $ 8,785     $ 5,767    $ 3,626     $ 3,630    $(2,778)
                                                   =======     =======    =======     =======    ======= 
Net income (loss) per diluted common                                                 
     share                                         $   .70     $   .48    $   .32     $   .45    $  (.87)
                                                   =======     =======    =======     =======    ======= 
                                                                                                
Weighted average number of diluted
     common shares outstanding                     $12,596      11,937     11,502       8,121      3,177
                                                   =======     =======    =======     =======    =======
Net income (loss) per basic
        common share                               $   .78     $   .53    $   .41     $   .75    $  (.87)
                                                   =======     =======    =======     =======    =======
                                                              
Weighted average number of basic
     common shares outstanding                      11,326      10,821      8,925       4,815      3,177
                                                   =======     =======    ========    =======    =======
                                                                                        


                                                                       December 31,
                                                  ------------------------------------------------------
                                                     1998         1997      1996        1995        1994
                                                   ------         ----      ----        ----        ----
                                                                      (In thousands)
Balance Sheet Data:
Cash and cash equivalents                        $  9,945      $12,910    $19,335     $35,525     $  301
Marketable securities                              36,881       27,746     15,684
Working capital (deficit)                          34,923       32,826     28,843      27,676     (7,102)
Total assets                                      112,187       89,453     70,171      52,356     11,385
Deferred revenues                                  31,276       29,136     22,885      16,557     13,484
Total debt                                                                                           250
Redeemable convertible preferred stock                                                             1,500
Total stockholders' equity (deficiency)            72,690       55,400     42,728      31,868     (7,226)

</TABLE>

<PAGE>18
ITEM 7.         MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

         META  Group  is an  independent  market  assessment  company  providing
research and analysis of developments, trends and organizational issues relating
to the computer  hardware,  software,  communications,  and related  information
technology  industries to IT users and vendors.  IT user  organizations  utilize
META  Group's  research,  analysis  and  recommendations  to develop  and employ
cost-effective  and revenue enhancing  strategies for selecting and implementing
timely IT solutions and for aligning these  solutions with business  priorities.
IT vendors use META Group's services for help in product positioning,  marketing
and market planning, as well as for internal IT decision making.

         Continuous  Services   subscriptions,   which  are  annually  renewable
contracts and generally payable by clients in advance,  comprised  approximately
77% and 82% of the  Company's  total  revenues for the years ended  December 31,
1998 and 1997,  respectively.  Billings attributable to the Company's Continuous
Services are initially  recorded as deferred  revenues and then  recognized  pro
rata over the contract term. During each of 1998, 1997, and 1996,  approximately
75% of the Company's clients renewed one or more  subscriptions;  however,  this
client retention rate is not necessarily  indicative of the rate of retention of
the  Company's  revenue  base.  The  Company's  other  revenues are derived from
project  consulting,  benchmarking,  conferences,  speaker  engagement  fees and
publications.  A significant portion of MGC clients are also Continuous Services
subscribers.

         One measure of the volume of the Company's  business is its  annualized
"Contract  Value,"  which the Company  calculates  as the  aggregate  annualized
subscription revenue recognized from all Continuous Services contracts in effect
at a given  point in time,  without  regard to the  remaining  duration  of such
contracts.  While  Contract  Value  is  not  necessarily  indicative  of  future
revenues,  Contract Value has grown every quarter since the Company's  inception
and  increased  30% to $62.6  million at December 31, 1998 from $48.3 million at
December 31, 1997. At December 31, 1998,  the Company had over 4,000  Continuous
Services subscribers in approximately 1,750 client organizations worldwide.

         Continuous Services revenues  attributable to international clients are
billed  and  collected  by  the  Company's  international  sales  representative
organizations.  The  Company  realizes  revenues  from the  international  sales
representative  organizations  at rates of 40% to 60% of amounts billed to those
clients.

         The  Company's  operating  expenses  consist  of cost of  services  and
fulfillment,  selling and  marketing  expenses  and  general and  administrative
expenses.  Cost of services and fulfillment represents the costs associated with
production and delivery of the Company's  products and services and includes the
costs of research,  development  and  preparation of periodic  reports,  analyst
<PAGE> 19
telephone  consultations,  executive  briefings and  conferences,  publications,
consulting  services,  new product development and all associated  editorial and
support services.  Selling and marketing expenses include the costs of salaries,
commissions  and related  benefits  for such  personnel,  travel and  promotion.
General  and  administrative  expenses  include  the  costs of the  finance  and
accounting  departments,   legal,  human  resources,   corporate  IT  and  other
administrative functions of the Company. See "Segment Reporting" in Note 12 to
the consolidated financial statements for information regarding the Company's
operating segments.

Results of Operations

         The following  table sets forth certain  financial data as a percentage
of total revenues for the periods indicated:

<TABLE>
<CAPTION>
                                                                     1998        1997       1996
                                                                     ----        ----       ----
<S>                                                                <C>          <C>        <C>   
  Revenues:
     Continuous services                                               77%         82%         83%
     Other revenues, principally consulting and publications           23          18          17
                                                                      ---         ---         ---

          Total revenues                                              100         100         100
                                                                      ---         ---         ---
  Operating expenses:
     Cost of services and fulfillment                                  48          48          51
     Selling and marketing                                             23          24          24
     General and administrative                                         9          10          10
     Depreciation and amortization                                      3           3           3
                                                                      ---         ---         ---
           Total operating expenses                                    83          85          88
                                                                      ---         ---         ---
  Operating income                                                     17          15          12
                                                                      ---         ---         ---
  Interest income                                                       4           4           5
                                                                      ---         ---         ---
  Income before provision for income tax                               21          19          17
                                                                      ---         ---         ---
  Provision for income tax                                              9           8           7
                                                                      ---         ---         ---
  Net income                                                           12%         11%         10%
                                                                      ---         ---         ---
</TABLE>


Years Ended December 31, 1998 and December 31, 1997

         Total  Revenues.  Total revenues  increased 42% to $72.8 million in the
year ended  December 31, 1998 from $51.2 million in the year ended  December 31,
1997. The increases in total revenues were primarily due to continued  expansion
of the Company's  domestic  sales force,  increases in the Company's  consulting
business (including the Sentry acquisition), recognition of new revenue from the
launch of three new  Continuous  Services in early 1997,  the  increase in sales
volume of subscription  publications,  as well as growing  international  market
acceptance of the Company's  products.  During 1998,  the Company  experienced a
shift in  business  demand by clients  towards  more  focused,  client  specific
services.  As a result,  the Company  experienced a slight decline in the growth
rate of Continuous Services revenue from the year ago period, and an increase in
the growth rate of consulting,  publications,  and  other  revenue  from the
year ago  period.  The Company currently expects this trend to continue for the 
foreseeable future.

         Revenues from Continuous Services increased 34% to $56.1 million in the
year ended  December 31, 1998 from $41.8 million in the year ended  December 31,
1997.  The  increases in  Continuous  Services  revenues  were  primarily due to
continued  expansion of the Company's  domestic sales force,  recognition of new
revenue  from the launch of three new  Continuous  Services in early  1997, the
<PAGE> 20
increase  in sales  volume  of  subscription  publications,  as well as  growing
international market acceptance of the Company's products. The Company increased
average  selling prices 6% to $17,600 in 1998 from $16,600 in 1997 by continuing
to broaden  research  coverage  within its  existing  Continuous  Services. The
Company  grew  its  subscriber  client  base  17% to  4,000  Continuous  Service
subscribers  at December 31, 1998 from 3,410  clients at December 31, 1997. The
Company currently expects Continuous Services revenue to continue to grow;
however, it expects the rate of growth to decline in 1999 versus 1998.

         Other revenues,  consisting principally of revenues from consulting and
non-subscription publications,  increased 78% to $16.7 million in the year ended
December  31, 1998 from $9.4 million in the year ended  December  31, 1997,  and
increased  as a  percentage  of total  revenues to 23% from 18%. The increase in
other revenues was primarily attributable to a shift in business to include more
leveraged  consulting  services,  both from MGC and analyst  consulting/speaking
engagements.  Also  significant  to the growth of other revenues was the October
1998  acquisition  of Sentry,  and, to a lesser  extent,  the  increase in sales
volume of the Company's  non-subscription  publications.  The Company  currently
expects a continued  acceleration  of the growth rate of revenue from consulting
and  non-subscription  publications as a result of the shift in business demand
by clients toward more focused, client specific services and the Sentry
acquisition discussed above.

         Revenues  attributable to  international  clients  increased 41% in the
year  ended  December  31,  1998 from the year  ended  December  31,  1997,  and
increased as a percentage of total Continuous Services revenues to 14% from 13%.
The  increase  was  primarily  due to the  increased  presence of the  Company's
services  in  existing   international   markets.   The  Company  currently  has
independent sales representation in 30 countries.  The Company currently expects
that  international  Continuous  Services  revenues  will  continue to grow at a
faster rate than domestic Continuous Services revenue.

         Cost of Services  and  Fulfillment.  Cost of services  and  fulfillment
increased  43% to $35.1  million in the year ended  December 31, 1998 from $24.6
million  in the year ended  December  31,  1997,  principally  due to  increased
analyst,  consultant  and  fulfillment  staffing  and related  compensation  and
overhead expense required to support the Company's growth both  domestically and
internationally;  and, to a lesser extent, to increased royalty payments made in
connection with certain joint product  offerings between the Company and certain
of its  entities in which it has a minority  investment.  Costs of services  and
fulfillment  remained  constant  as a percent of  revenues  at 48%.  The Company
currently expects  continued  increases in costs of services and  fulfillment
and expects that such expenses as a percentage  of total  revenue will remain
approximately the same.

         Selling  and  Marketing   Expenses.   Selling  and  marketing  expenses
increased  34% to $16.7  million in the year ended  December 31, 1998 from $12.5
million in the year ended  December 31, 1997 and  decreased  as a percentage  of
total revenues to 23% from 24%. The increase in expenses was  principally due to
increased   sales-related   compensation   expense   associated  with  increased
Continuous  Services  revenues,  the  expansion of the Inside Sales  channel for
selling   publications,   increased  costs   associated   with   development  of
international  markets, and higher marketing and promotion  expenditures related
<PAGE> 21
to the launch of new publications and service conference promotion.  The Company
anticipates continuing increases in the amount of selling and marketing expenses
as it continues to grow its domestic sales force to support the expanding  scope
of its product offerings. The Company currently expects that such expenses as a
percentage of total revenues will remain approximately the same.

         General  and  Administrative   Expenses.   General  and  administrative
expenses  increased 35% to $6.8 million in the year ended December 31, 1998 from
$5.0 million in the year ended  December 31, 1997 and  decreased as a percentage
of total revenues to 9% from 10%. The increase in expenses was  principally  due
to  increased  employee  benefits  costs,   recruiting  fees,  internal  systems
maintenance  and  facilities,  and  professional  education  costs.  The Company
currently  anticipates  continuing  increases  in  the  amount  of  general  and
administrative  expenses  and  expects  such  expenses  to remain  approximately
the same as a percentage of total revenues.

         Depreciation and  Amortization.  Depreciation and amortization  expense
increased  26% to $1.9  million in the year ended  December  31,  1998 from $1.5
million in the year ended  December 31, 1997. The increase in  depreciation  and
amortization  expense was  principally  due to office  furnishings and equipment
purchases required to support business growth.

         Interest  Income.  Interest income increased 23% to $2.6 million in the
year ended  December 31, 1998 from $2.1  million in the year ended  December 31,
1997 due to an increase in the Company's  balances of cash, cash equivalents and
marketable  securities,  resulting from positive cash flows from operations.  In
addition the Company  benefited from the  reinvestment  of a portion of its cash
into  short-term,   higher  yield  marketable   securities.   See  "Management's
Discussion    and   Analysis   of   Financial    Condition    and   Results   of
Operations--Liquidity and Capital Resources."

         Provision for Income Taxes. The Company recorded a provision for income
taxes of $6.2 million and $4.0 million,  reflecting an effective tax rate of 41%
during the years ended December 31, 1998 and 1997, respectively. The Company was
not required to pay federal  income tax due to the  utilization of net operating
loss  carryforwards.  The Company  anticipates that it will begin paying federal
income tax during 1999, due to the utilization in full of its net operating loss
carryfowards for federal income tax purposes.

Years Ended December 31, 1997 and December 31, 1996

         Total  Revenues.  Total revenues  increased 38% to $51.2 million in the
year ended  December 31, 1997 from $37.0 million in the year ended  December 31,
1996.  Revenues from Continuous  Services  increased 36% to $41.8 million in the
year ended  December 31, 1997 from $30.8 million in the year ended  December 31,
1996. The increases in total revenues and revenues from Continuous Services were
primarily  due to continued  expansion of the  Company's  domestic  sales force,
increases in average selling  prices,  recognition of new revenue from launch of
new Continuous  Services,  as well as growing worldwide market acceptance of the
Company's  products.  The Company increased average selling prices 8% to $16,600
in 1997 from $15,400 in 1996 by continuing to broaden  research  coverage within
its existing  Continuous  Services.  The Company grew its subscriber client base
22% to 3,410  Continuous  Service  subscribers  at December  31, 1997 from 2,800
clients at December 31, 1996.
<PAGE> 22

         Other revenues,  consisting principally of revenues from consulting and
publications,  increased 52% to $9.4 million in the year ended December 31, 1997
from $6.2  million in the year ended  December  31,  1996,  and  increased  as a
percentage of total revenues to 18% from 17%. The increase in other revenues was
primarily  attributable to the growth of META Group  Consulting and, to a lesser
extent, the growth of the Company's publications.

         Revenues  attributable to  international  clients  increased 75% in the
year  ended  December  31,  1997 from the year  ended  December  31,  1996,  and
increased as a percentage of total Continuous Services revenues to 13% from 10%.
The  increase  was  primarily  due to the  increased  presence of the  Company's
services  in  existing   international   markets.   

         Cost of Services  and  Fulfillment.  Cost of services  and  fulfillment
increased  30% to $24.6  million in the year ended  December 31, 1997 from $18.9
million  in the year ended  December  31,  1996,  principally  due to  increased
analyst,  consultant and fulfillment  staffing and related  compensation expense
required to support the Company's growth both  domestically and  internationally
and,  to a lesser  extent,  due to the  development  and  launch  of  three  new
Continuous Services. Costs of services and fulfillment decreased as a percent of
revenues to 48% from 51%. This decrease  primarily reflects the improved average
selling prices discussed above.

         Selling  and  Marketing   Expenses.   Selling  and  marketing  expenses
increased  42% to $12.5  million in the year ended  December  31, 1997 from $8.8
million  in the  year  ended  December  31,  1996  and  remained  constant  as a
percentage  of total  revenues at 24%. The increase in expenses was  principally
due to increased  sales-related  compensation  expense associated with increased
revenues,  the expansion of a direct marketing  publications channel, and higher
marketing and promotion  expenditures  related to the launch of new services and
publications.

         General  and  Administrative   Expenses.   General  and  administrative
expenses  increased 34% to $5.0 million in the year ended December 31, 1997 from
$3.7  million in the year ended  December  31, 1996 and  remained  constant as a
percentage  of total  revenues at 10%. The increase in expenses was  principally
due to increased  finance,  accounting,  and corporate IT staffing  necessary to
support business growth.  In addition,  higher facilities costs were incurred in
connection  with the Company's  expansion into larger offices in Reston,  VA and
Waltham, MA.

         Depreciation and  Amortization.  Depreciation and amortization  expense
increased  38% to $1.5  million in the year ended  December  31,  1997 from $1.1
million in the year ended  December 31, 1996. The increase in  depreciation  and
amortization  expense was  principally  due to office  furnishings and equipment
purchases  required  to  support  business  growth and the  expansion  to larger
offices in Reston, VA and Waltham, MA during late 1996.

         Interest Income.  Interest income increased to $2.1 million in the year
ended  December 31, 1997 from $1.9  million in the year ended  December 31, 1996
due to an increase in the Company's balances of cash and marketable  securities,
resulting from positive cash flows from operations.
<PAGE> 23
         Provision for Income Taxes. The Company recorded a provision for income
taxes of $4.0 million and $2.7 million,  reflecting an effective tax rate of 41%
and 43%,  during the years ended December 31, 1997 and 1996,  respectively.  The
Company's  effective  tax rate has  declined due to the  continued  expansion of
business in states with lower income tax rates.  The Company was not required to
pay federal income tax in 1997 and 1996 due to the  utilization of net operating
loss carryforwards.

Liquidity and Capital Resources

         The Company has funded its  operations  to date  primarily  through its
initial public offering,  cash generated from operations,  and proceeds from the
exercise of common stock options.  In December  1995,  the Company  received net
proceeds (after deducting underwriting  commissions and discounts and applicable
offering  expenses) of $30.2 million  relating to its initial public offering of
2,790,000  shares of Common Stock.  The Company  generated  $9.3  million,  $8.2
million,  and $5.5  million  of cash from  operations  during  the  years  ended
December 31, 1998, 1997, and 1996, respectively, primarily due to net income and
the  utilization  of net  operating  loss  carryfowards  to reduce cash paid for
income taxes.

         The Company used $3.2 million, $1.9 million and $1.7 million of cash in
the years ended December 31, 1998, 1997, and 1996, respectively for the purchase
of furniture, equipment, computers and related software for use by the Company's
employees.  The Company expects that  additional  purchases of equipment will be
made as the Company's  employee base grows. As of December 31, 1998, the Company
had no material  commitments for capital  expenditures;  however, the Company is
currently upgrading significant internal systems to support business growth. The
total cash outlay for the completion of the project in 1999 (excluding  internal
resources) is not expected to exceed $1.0 million.

         During the years ended  December 31, 1998,  1997 and 1996,  the Company
made  investments  and advances to several  companies in parallel or synergistic
industries.  The balance of the  Company's  investments  and  advances  was $8.3
million,  $6.4 million and $5.2 million at December  31, 1998,  1997,  and 1996,
respectively.  These  investments and advancements are summarized  below, and in
Note 6 to the  notes to the  consolidated  financial  statements.  See  "Certain
Factors  That May  Affect  Future  Results  Risk  Associated  With  New  Product
Development" and "- Potential Acquisitions."

        On March 15, 1999 the Company entered into an agreement to invest 
$2.7 million in META Security Group, an independent start-up consulting firm.
META Security Group offers security consulting services and hands-on operational
support services including threats and vulnerability assessments, policy and 
standards development, network monitoring services and technical research and
development.
    
        In October 1998,  the Company  completed the  acquisition of all of the
outstanding  capital stock of The Sentry Group, Inc., an IT consulting  company,
for an initial  payment of 195,066  shares of the  Company's  common stock and a
contingent  payment of up to $7.0 million in common  stock or (at the  Company's
option) cash in the event certain  financial  targets are met by Sentry in 1999.
In addition,  the Company issued to Sentry stockholders  warrants to purchase up
to 200,000  shares of the  Company's  common stock at $30.00 per share,  125,000
shares  of which  are  currently  exercisable  and  75,000  shares  of which are
contingently  exercisable upon Sentry  achieving  certain  financial  targets in
1999. The 125,000 warrants currently  exercisable  expire in October 2002. The
75,000 warrants  contingently  exercisable  expire four years after the date the
Company  pays  contingent  consideration,  if any,  to the  Sentry  stockholders
pursuant to the terms of the  acquisition.  The fair value of the  noncontingent
consideration, including  acquisition costs, was $5.9 million. This acquisition
<PAGE> 24
was  accounted  for as a  purchase.  See  "Business  - Products and  Services -
INitiatives: META Group Consulting" and "Management's Discussion and Analysis of
Financial  Condition and Results of Operations - Certain Factors That May Affect
Future  Results - Risk of  Failure to  Integrate  Recent  Acquisition  and Risks
Associated with Potential Acquisitions."

         In October 1998, the Company invested $500,000 in IMT Strategies, Inc.
("IMT")  in  the  form  of a  loan  represented  by a  secured  promissory  note
convertible at any time into IMT's common stock.  IMT was established to deliver
syndicated research, publications, consulting services, management education and
training focused on the integration of marketing and technology.

         In October 1998,  the Company  invested  $300,000 in Intermedia  Group,
Inc.  ("IMG") in the form of a loan  represented by a senior secured  promissory
note  convertible  at any time into IMG's common  stock.  IMG is an  intergrated
media and conference  business  established to serve markets in a  complementary
fashion to the Company's main lines or new lines of business.
       
         In September 1998, the Company made an investment of $1 million in 
Client/Server Labs, Inc., a supplier of performance and functional IT testing
services devoted to assessing the performance and viability of IT solutions.

         In November 1997, the Company advanced $1.3 million in cash to a joint
venture with SRI Consulting, Inc., designed to deliver thought-leading research,
methods,  metrics,  and tools to senior  management  of  global  2000  companies
scenario  planning  for the  future.  SRI  Consulting,  Inc.  is a  wholly-owned
subsidiary of SRI International,  a Silicon Valley based think-tank working with
companies worldwide to identify market  opportunities and develop strategies for
competing in technology-driven  markets. See "Business - Products and Services -
INitiatives: META Group Consulting."
         
          The Company regularly invests excess funds in high quality short-term
investments,  such as repurchase  agreements, short-term  commercial paper and
money market funds. As these investments generally have terms of less than three
months,  they are included under the caption "Cash and cash  equivalents" in the
consolidated balance sheets.

         In  addition,  the  Company  invests  in other  short-term  (less  than
one-year maturity),  high quality marketable debt securities.  Generally,  these
securities are purchased in  denominations  of $1 million to $5 million and held
to maturity. No losses have been experienced on such investments.

         As of December 31, 1998,  the Company had cash and cash  equivalents of
$9.9 million, marketable securities valued at $36.9 million, and working capital
of $34.9  million.  The Company  believes  that its existing  cash  balances and
anticipated  cash flows from  operations  will be sufficient to meet its working
capital,  investment,  and capital expenditure  requirements for the foreseeable
future.
<PAGE> 25
Year 2000 Readiness Disclosure

         The following disclosure may be deemed "Year 2000 Readiness Disclosure"
pursuant to the Year 2000 Information and Readiness Disclosure Act.

State of Readiness

         During  1998,  the Company  commenced a program to review the Year 2000
compliance  status of both the IT and non-IT  software  and systems  used in its
internal business processes, to obtain appropriate assurances of compliance from
the manufacturers of these products,  and to modify or replace all non-compliant
products.

         The Company  made  inquiries  with  critical  third party  providers of
intermediary products or services to determine the impact of Year 2000 issues on
their  business and  operations,  and the  resulting  impact on the business and
operations of the Company. Certain of these systems relate to the ability of the
Company to  transmit  its  products to its  customers  via the  internet  and by
CD-ROM,  and are  reliant  on the  compliance  of the third  parties in order to
operate past 1999. The Company has been advised by the applicable  third parties
that the necessary  modifications for the Year 2000 issue have been completed or
will be completed by the end of 1999. In addition, the Company believes that its
internal  systems are Year 2000  compliant to interface with such third parties.
However, the Company can offer no assurance that its systems, to the extent they
are reliant on third party systems, will be operational on January 1, 2000.

         The Company has contacted  most of the suppliers of its other  software
and systems to determine  whether the products  obtained by the Company are Year
2000  compliant and is currently  reviewing  other areas within its business and
operations which could be adversely  affected by Year 2000 issues.  Based on the
responses  the  Company  has  received  from   manufacturers  and  the  internal
evaluation  performed  through March 1999, the Company  believes that it will be
able to upgrade or replace any critical Year 2000 deficient  software or systems
prior to the end of 1999.

         Among the systems  being  reviewed is the Company's  current  telephone
system, which is critical to the function of the business. The Company currently
plans to replace its existing telephone system during 1999. Also, in response to
the increase in clients and  employees,  and the need for  improved  information
management for customer service, the Company expects to complete  implementation
of a new client  information  system during the first half of 1999. In selecting
the new client information  system, Year 2000 compliance was one of the criteria
reviewed, and the Company has obtained a representation from the vendor that the
system is Year 2000 compliant.

         Currently,  the Company has not identified any internal  non-IT systems
that are both critical to the business and would cause significant disruption of
business in the event of failure in the year 2000.

Costs to Address Year 2000 Issues

         Based  on the  Company's  internal  evaluation  performed  to  date  on
potential costs for completing the evaluating,  testing,  modifying or replacing
<PAGE> 26
of any of its internal IT or non-IT software or systems,  the Company  currently
expects to spend approximately $2.2 million (including $2.1 million of costs for
replacing  the client  information  system and telephone  system),  of which the
Company has spent  approximately  $1.3  million as of  December  31,  1998.  The
Company will fund all Year 2000 compliance costs from existing working capital.

         The potential  costs  associated  with failure of the internet or other
major systems outside the Company's control (i.e., utilities, telephone service,
etc.), or of any significant non-IT systems,  including increased costs of doing
business, inability to conduct business, potential loss of customers, and impact
of certain risk areas as discussed below, are unknown and cannot be estimated by
the Company.

Risks Associated with Year 2000 Issue

         The  primary  risk to the Company in the event of  non-compliance  with
Year 2000 issues is a  disruption  of  customer  fulfillment.  As a  significant
portion of the Company's clients choose to have the Company's products delivered
via the internet,  failure of that system could prevent customers from accessing
the Company's products via the Company's internet site. Likewise, failure of the
telephone  systems  would  prevent the Company from  speaking with its customers
directly, which is an integral part of the Company's service and products. Also,
failure of the client  information  system would  result in potential  delays in
responding to customers' inquiries.

         In  addition  to the risks to the  Company's  systems as they relate to
customer  service,  and  discussed  above,  the Year  2000  Issue  presents  the
following business risks to the Company:

    o    Because the Company's  business  results from selling  knowledge  based
         research  on a wide  variety  of IT issues,  the short term  demand for
         certain of the Company's  products could  potentially be hindered while
         customers and potential  customers focus immediate  resources on fixing
         their own Year 2000 issues.  Although the  Company's  products  include
         advisory  services on the Year 2000 issue itself,  and therefore  could
         potentially increase business for the Company,  such impacts can not be
         estimated by the Company at this time.  As such,  there  remains a risk
         that a shift  in the  focus  of  customers'  and  potential  customers'
         discretionary  IT spending could have a material  adverse effect on the
         Company's business, operating results and financial condition.

    o    Part  of the  Company's  services  to its  customers  involves  forming
         opinions and making  suggestions  with  regards to IT issues.  As such,
         customers  rely on the  Company  for  advice  when  making  IT  related
         decisions,  which may involve Year 2000 issues.  Because of the overall
         risk of litigation  associated with the Year 2000 issue, there exists a
         risk that the  Company  could face legal  action  from a customer or be
         named  as a  co-defendant  in an  action  by a third  party  against  a
         customer.  The likelihood of such action  occurring,  and the potential
         related costs, cannot be estimated by the Company at this time.

    o    Failure of certain  systems of third  parties due to Year 2000 issues
         could  potentially  create the risk of impairment of certain  assets of
         the company. In particular, the Company currently has approximately 
         $36.9 million in marketable  securities,  which are primarily invested
<PAGE> 27
         in unsecured,  short- term investment  grade,  corporate debt  
         instruments  (commercial  paper). Financial impairment to certain  
         entities in which the Company has a minority  investment, or a collapse
         of the securities markets in general, would potentially have a material
         adverse effect on the company's  financial position.  In addition,  the
         Company currently has over $35 million in accounts receivable from
         customers and international  sales  representative  organizations, as
         well as significant investments  in  other  companies. Financial  
         impairment  to  certain  of  such companies due to Year 2000 issues 
         could  potentially  have a material  adverse effect on the  company's
         financial  position  and  results of  operations.  The likelihood of
         such action occurring, and the potential related costs, cannot be 
         estimated by the Company at this time.

Contingency Plans

         The Company has the  following  contingency  plans in place in order to
protect customer service in the event of Year 2000 disruptions:

    o    The Company's  research is available in written form as well as via the
         internet and CD-ROM.  In the event of  disruption of the other forms of
         delivery,  the Company  will  deliver  research in printed  form to all
         customers.  The  incremental  cost of doing so would not be material to
         the results of  operations  and is currently  an option many  customers
         continue to use.

    o    In the event the  Company  is unable to  replace  the  existing  client
         information  system  prior to the end of 1999,  the Company  intends to
         upgrade the existing  system to be Year 2000 compliant prior to the end
         of 1999.

    o    In the event the Company is unable to replace the existing phone system
         prior to the end of 1999,  the Company  intends to upgrade the existing
         system to be Year 2000 compliant  prior to the end of 1999. The Company
         does not currently have a contingency plan in the event of a failure of
         long distance telephone service in general.

         The Company does not currently  have a  contingency  plan in place with
regards to the risk of asset  impairment  described  above but will be reviewing
investment risk to include Year 2000 exposure as we approach the year 2000.

Certain Factors That May Affect Future Results

         The Company does not provide forecasts of its future financial
performance. From time to time, however, information provided by the Company or
statements made by its employees may contain "forward looking"  information that
involve risks and  uncertainties.  In particular,  statements  contained in this
Form 10-K (and in the documents  incorporated  by reference into this Form 10-K)
which are not  historical  facts  (including,  but not  limited  to,  statements
concerning the shift in client business demand and the resulting impact on total
revenues,  the growth  rates of  Continuous  Services  revenue and revenue  from
Consulting and non-subscription publications,  growth in international revenues,
anticipated  operating  expense levels and such expense  levels  relative to the
Company's  total  revenues,  anticipated  capital  expenditure  levels,  working
capital investment and capital expenditure requirements, Year 2000 readiness and
<PAGE> 28
anticipated Year 2000 compliance  costs) constitute  forward looking  statements
and are  made  under  the  safe  harbor  provisions  of the  Private  Securities
Litigation  Reform Act of 1995.  The Company's  actual results of operations and
financial  condition have varied and may in the future vary  significantly  from
those  stated in any  forward-looking  statements.  Factors  that may cause such
differences  include,  without  limitation,  the risks,  uncertainties and other
information  discussed within this Form 10-K (and in the documents  incorporated
by  reference  into this Form 10-K),  as well as the  accuracy of the  Company's
internal estimates of revenue,  operating expense levels, growth rates and other
anticipated expenditures.

         The  following  risk  factors  should be read in  conjunction  with the
detailed  information  in this Form 10-K (and in the documents  incorporated  by
reference into this Form 10-K). The following factors, among others, could cause
actual  results to differ  materially  from those  contained in forward  looking
statements  contained  or  incorporated  by  reference  in this  Form  10-K  and
presented by management from time to time. Such factors,  among others, may have
a material adverse effect upon the Company's business, results of operations and
financial condition.

Dependence on Renewals of Subscription-Based Services

         The Company  derived  approximately  82% of its total  revenues in 1997
from  subscriptions  to the  Company's  Continuous  Services.  In the year ended
December 31, 1998, the Company derived  approximately  77% of its total revenues
from  subscriptions  to  its  Continuous  Services.  Approximately  seventy-five
percent  of the  Company's  Continuous  Service  clients  renewed  at least  one
subscription  in 1997 and 1998. The Company,  however,  may not be successful in
maintaining its subscription  renewal rates. During 1998 the Company experienced
a shifting client demand towards more consultative,  solution-oriented products.
With the advent of the internet,  information alone, without analysis in context
of a client's  environment,  will have less  value.  In  addition  to this,  the
Company's  ability  to renew  subscriptions  is  subject  to a number  of risks,
including the following:

      o  the Company may be  unsuccessful  in delivering  consistent,  high 
         quality and timely analysis and advice to its clients.

      o  the  Company  may not be able to hire and retain a large and  growing
         number of highly  talented  professionals  in a very  competitive job
         market.

      o  the Company may be  unsuccessful  in  understanding  and  anticipating
         market trends and the changing needs of its clients.

      o  the Company may not be able to deliver  products  and  services of the
         quality and timeliness to withstand competition.

If the Company is unable to successfully maintain its subscription renewal rates
or sustain the necessary  level of  performance,  such an inability could have a
material adverse effect on the Company's business and financial results.
<PAGE> 29
Potential Fluctuations in Operating Results

         The Company's operating results have varied  significantly from quarter
to quarter.  The Company  expects future  operating  results to fluctuate due to
several factors, many of which are not in the Company's control:

     o   the  disproportionately  large  portion of the  Company's  Continuous
         Services  subscriptions  that  expire in the  fourth  quarter of each
         year;

      o  the level and timing of renewals of subscriptions to the Company's
         Continuous Services;

      o  the mix of Continuous Services versus the consulting and publications 
         business;

      o  the timing and amount of new business generated by the Company;

      o  the mix of domestic versus international business;

      o  the timing of the development, introduction and marketing of new 
         products and services;

      o  the timing of the hiring of research analysts, consultants, and sales
         representatives;

      o  changes in the spending patterns of the Company's clients;

      o  the Company's accounts receivable collection experience;

      o  changes in market demand for IT research and analysis; and

      o  competitive conditions in the industry.

Due to these  factors,  the Company  believes  period-to-period  comparisons  of
results of operations  are not  necessarily  meaningful and should not be relied
upon  as  an  indication  of  future  results  of   operations.   The  potential
fluctuations  in the  Company's  operating  results make it likely that, in some
future quarter,  the Company's  operating results will be below the expectations
of securities analysts and investors, which could have a material adverse effect
on the price of the Company's Common Stock.

Risks Associated with International Operations

         Net  revenues   attributable  to  international   clients   represented
approximately  13% of the Company's total Continuous  Services  revenues for the
year ended  December  31,  1997 and  approximately  14% of the  Company's  total
Continuous  Services  revenues for the year ended December 31, 1998. The Company
sells its products  internationally  through a network of 30  independent  sales
<PAGE> 30
representative organizations.  The Company assumes significantly greater risk by
selling through  independent sales  representative  organizations than through a
direct employee sales force. These risks to the Company include:

      o  greater  accounts  receivable  collection  risk  (because the Company
         relies  on the  sales  representative  organization  to  invoice  and
         collect receivables);

      o  longer accounts receivable collection cycles;

      o  the financial health of individual sales representative organizations;

      o  developing and managing relationships with sales representative
         organizations;

      o  greater difficulty in maintaining direct client contact;

      o  fluctuations in exchange rates;

      o  political, social, and economic conditions in various jurisdictions;

      o  tariffs and other trade barriers; and

      o  potentially adverse tax consequences.

         The Company  expects that  international  operations  will continue to
account for a  significant  portion of its  revenues  and intends to continue to
expand its international  operations.  Expansion into new geographic territories
may require  considerable  management and financial resources and may negatively
impact the Company's  near-term results of operations.  If the Company is unable
to successfully manage the risks associated with international operations,  such
an inability could have a material adverse effect on the Company's  business and
financial results.

Risks of Failing to Anticipate Changing Market Needs

         The  Company's  success  depends in part upon its ability to anticipate
rapidly  changing  technologies  and market trends and to adapt its Products and
Services to meet the changing information and analysis needs of IT users. During
1998 the Company experienced a shifting client demand towards more consultative,
solution-oriented products. With the advent of the internet,  information alone,
without analysis in context of a client's environment,  will have less value. In
addition to this, frequent and often dramatic changes,  including the following,
characterize the IT industry:

      o  introduction of new products and obsolescence of others;

      o  shifting strategies and market positions of major industry 
         participants;

      o  paradigm shifts with respect to system architectures; and

      o  changing objectives and expectations of IT users and vendors.
<PAGE> 31

         This  environment of rapid and continuous  change presents  significant
challenges  to the  Company's  ability to provide its clients  with  current and
timely  analysis and advice on issues of importance to them. The Company commits
substantial  resources  to meeting  these  challenges.  If the Company  fails to
provide   insightful   timely  analysis  of   developments   and  assessment  of
technologies  and trends in a manner that meets  changing  market needs,  such a
failure  could  have a  material  and  adverse  effect on the  Company's  future
operating results.

Dependence on Ability to Attract and Retain Qualified Personnel

         The Company  needs to hire,  train and retain a  significant  number of
additional  qualified  employees to execute its strategy and support its growth.
In particular, the Company needs trained research analysts,  consultants,  sales
representatives  and  product  development  and  operations  staff.  The Company
continues  to  experience  intense   competition  in  recruiting  and  retaining
qualified  employees.  The pool of  experienced  candidates  is small;  and, the
Company  competes for  qualified  employees  against many  companies,  including
Gartner Group,  that have  substantially  greater  financial  resources than the
Company.  If the Company is unable to successfully  hire,  retain and motivate a
sufficient number of qualified employees, such an inability will have a material
adverse effect on the Company's business and financial results.

Competition

         The IT research and analysis  industry is  extremely  competitive.  The
Company competes directly with other  independent  providers of similar services
and  indirectly  with the  internal  staffs of current  and  prospective  client
organizations.  The Company's principal direct competitor,  Gartner Group, has a
substantially  longer operating  history and has considerably  greater financial
resources  and  market  share  than  the  Company.  The  Company  also  competes
indirectly  with larger  electronic  and print media  companies  and  consulting
firms.  The Company's  indirect  competitors,  many of which have  substantially
greater  financial,  information  gathering  and  marketing  resources  than the
Company, could choose to compete directly against the Company in the future.

         The Company's market has few barriers to entry.  New competitors  could
easily compete against the Company in one or more market  segments  addressed by
the Company's Continuous Services.  The Company's current and future competitors
may develop  products and services  that are more  effective  than the Company's
products.  Competitors may also produce their products and services at less cost
and market  them more  effectively.  If the  Company  is unable to  successfully
compete  against  existing or new  competitors,  such an  inability  will have a
material  adverse  effect on the  Company's  operating  results and would likely
result in pricing pressure and loss of market share.

Risks Associated With New Product Development

         The  Company's  future  success  depends  on its  ability to develop or
acquire new products and services  that address  specific  industry and business
sectors,  changes in client  requirements  and  technological  changes in the IT
industry.  The process of  internally  researching,  developing,  launching  and
gaining  client  acceptance of a new product or service is inherently  risky and
costly. Assimilating and marketing an acquired product or service is also risky
<PAGE> 32
and costly. During 1998 the Company experienced a shifting client demand towards
more consultative,  solution-oriented products. With the advent of the internet,
information alone, without analysis in context of a client's  environment,  will
have less  value.  In  addition to this,  the  Company  has  introduced  few new
products  or  services  and has had limited  experience  in  managing  strategic
investments. From April 1996 to December 1998, the Company invested $8.3 million
in several  companies whose  products,  services  and/or  distribution  channels
complement  the  Company's  business.  If the  Company is unable to develop  new
products  and services or manage its  strategic  investments,  such  inabilities
could have a material adverse effect on the Company's operating results.

Dependence on Key Personnel

         The Company relies, and will continue to rely, in large part on its key
management,  research,  consulting,  sales,  product  development and operations
personnel.  The Company's success in part depends on its ability to motivate and
retain highly qualified employees.  If Dale Kutnick (President,  Chief Executive
Officer and  Co-Research  Director)  and/or other senior officers of the Company
leave the Company,  such loss or losses could have a material  adverse effect on
the Company.

Risk of Product Pricing Limiting Potential Market

         The Company's  pricing  strategy may limit the potential market for the
Company's  Continuous Services to substantial  commercial and governmental users
and vendors of IT. As a result, the Company may be required to reduce prices for
its Continuous  Services or to introduce new products with lower prices in order
to expand or maintain  its market  share.  These  actions  could have a material
adverse effect on the Company's business and results of operations.

Management of Growth

         Since inception,  the Company's  operations have changed  substantially
due to the  expansion  and  growth  of the  Company's  business.  Growth  places
significant demands on the Company's management, administrative, operational and
financial resources.  The Company's ability to manage growth, should it continue
to occur,  will  require  the  Company to continue to improve its systems and to
motivate  and  effectively  manage  an  evolving  workforce.  If  the  Company's
management is unable to effectively manage a changing and growing business,  the
quality of the  Company's  products,  its  retention  of key  employees  and its
results of operations could be materially adversely affected.

Risk of Failure to Integrate Recent Acquisition and Risks Associated with
Potential Acquisitions

         As  part  of  its  business  strategy,   the  Company  buys,  or  makes
investments in, complementary businesses,  products and services. If the Company
finds a  business  it wishes to  acquire,  the  Company  could  have  difficulty
negotiating the terms of the purchase,  financing the purchase, and assimilating
the employees,  products and operations of the acquired  business.  Acquisitions
may  disrupt  the ongoing  business  of the  Company  and  distract  management.
Furthermore,  acquisition  of new  businesses  may not  lead  to the  successful
development  of new  products,  or if  developed, such products may not achieve
<PAGE> 33
market acceptance or prove to be profitable. A given acquisition may also have a
material  adverse  effect on the  Company's  financial  condition  or results of
operations.  In  addition,  the  Company  may be required to incur debt or issue
equity to pay for any future acquisitions.

         In October 1998, the Company acquired Sentry, an IT consulting company.
The Sentry acquisition  required  extensive  management time with respect to the
negotiation and  consummation of the  transaction.  The Company expects that the
time and costs  associated  with the integration of the Sentry business into the
Company's  existing  MGC division will be  significant. The Company may not be
able to successfully  integrate the Sentry business, and any such inability 
could have a material adverse affect on the Company's operations and financial
results.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

       See "Concentration of Credit Risk" in Note 2 to the consolidated 
financial statements for information regarding the Company's approach to 
financial risk management.    


ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

       The financial  statements listed in the following Index to Consolidated
Financial  Statements  are  filed as a part of this  Annual  Report on Form 10-K
under Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K.

                INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                           META GROUP, INC.
                                                                           Page
Independent Auditors' Report............................................... F-1

Consolidated Balance Sheets at December 31, 1998 and 1997.................. F-2

Consolidated Statements of Income for the years ended December 31, 1998,
  1997 and 1996............................................................ F-3

Consolidated Statements of Changes in Stockholders' Equity for the years
  ended December 31, 1998, 1997 and 1996................................... F-4

Consolidated Statements of Cash Flows for the years ended December 31, 1998,
  1997 and 1996............................................................ F-5

Notes to Consolidated Financial Statements................................. F-6


ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURE

     None.
<PAGE> 34

                             PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

       The information required  by this item may be found  under the sections
captioned  "Election of  Directors,"  "Occupations  of Directors  and  Executive
Officers" and "Section 16 (a) Beneficial Ownership Reporting  Compliance" in the
Company's Proxy Statement (the "1999 Proxy  Statement") for the Company's Annual
Meeting of Stockholders  to be held on May 20, 1999, and is incorporated  herein
by reference.  The 1999 Proxy  Statement  will be filed with the  Securities and
Exchange  Commission  no later  than 120 days  after the close of the  Company's
fiscal year ended December 31, 1998.

ITEM 11.  EXECUTIVE COMPENSATION

       The  information  required  by this item may be found under the section
captioned "Compensation And Other Information Concerning Directors and Officers"
in the 1999 Proxy Statement, and is incorporated herein by reference.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT

       The  information  required  by this item may be found under the section
captioned  "Management And Principal  Holders of Voting  Securities" in the 1999
Proxy Statement, and is incorporated herein by reference.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

       The  information  required  by this item may be found under the section
captioned  "Certain  Relationships  and Related  Transactions" in the 1999 Proxy
Statement, and is incorporated herein by reference.
<PAGE> 35
                              PART IV

ITEM  14.  EXHIBITS,  FINANCIAL STATEMENT SCHEDULE AND
           REPORTS ON FORM 8-K

       (a)(1)... Financial Statements.

       The following  consolidated financial statements are included in Item 8
       of this report:
                                                                           Page
                                                                           ----

Independent Auditors' Report................................................F-1

Consolidated Balance Sheets at December 31, 1998 and 1997...................F-2

Consolidated Statements of Income for the years ended December 31, 1998,
  1997 and 1996.............................................................F-3

Consolidated Statements of Changes in Stockholders' Equity for the years
  ended December 31, 1998, 1997 and 1996....................................F-4

Consolidated Statements of Cash Flows for the years ended December 31, 1998,
  1997 and 1996.............................................................F-5

Notes to Consolidated Financial Statements..................................F-6

       (a)(2)   Financial Statement Schedule.

        The following  financial statement schedule for the Company is filed as
part of this report:

Schedule II - Valuation and Qualifying Accounts.............................S-1

        Schedules  not listed above have been omitted  because the  information
required  to be  set  forth  therein  is  not  applicable  or is  shown  in  the
accompanying Consolidated Financial Statements or notes thereto.
<PAGE> 36
        (a)(3)  List of Exhibits.

         The  following  exhibits  are  filed as part of,  and  incorporated  by
reference into this Annual Report on Form 10-K:
         Exhibit
         Number          Description
         ------          -----------
           2.1(1)(2)     Agreement  and  Plan  of  Merger  by and  among  MET
                         Group,  Inc.,  MG  Acquisition Corporation  and The 
                         Sentry Group,  Inc.  dated as of September 23, 1998
                         ("Agreement and Plan of Merger")
           2.2(1)        Amendment No. 1 to Agreement and Plan of Merger
           3.1(3)        Amended and Restated Certificate of Incorporation of 
                         the Company
           3.2(3)        Amended and Restated By-Laws of the Company
           4.1(3)        Specimen certificate representing the Common Stock
           4.2(1)        Registration  Rights  Agreement dated as of October 20,
                         1998 by and among META Group,
                         Inc. and the  stockholders  of The Sentry Group,  Inc.
                         listed on the signature pages
                         thereto
           4.3(1)        Escrow Agreement dated as of October 20, 1998 among
                         META Group,  Inc., Peter A. Naber and State Street
                         Bank and Trust Company
           4.4(6)        Form of Common Stock Purchase Warrant (Immediate
                         Vesting)issued to stockholders of The Sentry Group,
                         Inc. on October 20, 1998
           4.5(6)        Form of Common Stock Purchase Warrant (Contingent 
                         Vesting) issued to stockholders of The Sentry Group, 
                         Inc. on October 20,1998
          10.1(7)*       Amended and Restated 1995 Stock Plan
          10.2(4)*       Form of Incentive  Stock Option  Agreement  under the
                         Amended and Restated 1995 Stock Plan
          10.3(4)*       Form of  Non-Qualified  Stock Option  Agreement under 
                         the Amended and Restated 1995 Stock Plan
          10.4(5)*       1995 Employee Stock Purchase Plan Enrollment
                         Authorization Form
          10.5(3)*       1995 Non-Employee Director Stock Option Plan
          10.6(4)*       Form of  Non-Qualified  Stock Option Agreement under
                         the 1995  Non-Employee  Director Stock Option Plan of
                         the Registrant
          10.7(3)(2)*    Agreement  between First  Albany Corporation and the 
                         Company dated March 30, 1995
          10.8(3)*       Restated  and Amended  1989 Stock  Option Plan,  as 
                         amended
          10.9(3)*       Form of Incentive Stock Option Agreement under 1989
                         Stock Option Incentive Plan
          10.10(3)*      Form of  Certificate  and Agreement  under Restated 
                         and Amended 1989 Stock Option Plan
          10.11(3)*      1993 Stock Option and Incentive Plan, as amended
          10.12(3)*      Form of Certificate and Agreement under 1993 Stock
                         Option  and  Incentive  Plan
          10.13(3)*      Form of  Warrant  under the Restated and Amended 1989 
                         Stock Option Plan and 1993 Stock Option and Incentive
                         Plan
          10.14(3)       Form of International Sales Representative Agreement
          10.15(3)       Office Lease between  International Business Machines
                         Corporation and the Company dated August 1, 1994
<PAGE> 37
         Exhibit
         Number          Description
         ------          -----------
          10.16(6)*      Form of META Group,Inc./JMI Long Term Incentive
                         Compensation Plan
          10.17(7)*      Amended and Restated 1996 Equity Compensation Plan of
                         The Sentry Group, Inc.
          11.1+          Statement re computation of per share earnings
          21.1+          List of subsidiaries
          23.1+          Consent of Deloitte & Touche LLP
          24.1+          Power of Attorney (see page 31)
          27.1+          Financial Data Schedule
         --------------

         (1)  Incorporated herein by reference to the exhibits to the Company's
              Current Report on Form 8-K dated October 20, 1998
              and filed on November 3, 1998 (File No. 0-27280).
         (2)  Confidential treatment obtained as to certain portions.
         (3)  Incorporated herein by reference to the exhibits to the Company's
              Registration Statement on Form S-1 (File No. 33-97848).
         (4)  Incorporated herein by reference to the exhibits to the Company's
              Registration Statement on Form S-8 (File No. 333-1854).
         (5)  Incorporated herein by reference to the exhibits to the Company's
              Registration Statement on form S-8 (File No. 33-80539).
         (6)  Incorporated herein by reference to the exhibits to the Company's
              Quarterly Report on Form 10-Q dated November 16, 1998
              (File No. 0-27280).
         (7)  Incorporated herein by reference to the exhibits to the Company's
              Registration Statement on Form S-8 (File No.333-68323).
          *   Indicates a management contract or any compensatory plan, 
              contract or arrangement.
          +   Filed herewith.
         (b)    Reports On Form 8-K

         The Company filed a Current  Report on Form 8-K dated  November 3, 1998
reporting the acquisition of The Sentry Group, Inc.

         (c)    Exhibits.

         The Company hereby files as part of this Annual Report on Form 10-K the
exhibits listed in Item 14(a)(3) set forth above.
<PAGE> 38
                              SIGNATURES


         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                           META Group, Inc.



Date: March 31, 1999                    By: /s/ Dale Kutnick                    
                                        --------------------------------------
                                        Dale Kutnick
                                        President, Chief Executive Officer and
                                        Co-Research Director


                       POWER OF ATTORNEY AND SIGNATURES

      We, the undersigned  officers and directors of META Group, Inc., hereby
severally  constitute and appoint Dale Kutnick and Bernard F. Denoyer,  and each
of them singly,  our true and lawful attorneys,  with the power to them and each
of them  singly,  to sign for us and in our  names in the  capacities  indicated
below,  any  amendments  to this Report on Form 10-K,  and  generally  to do all
things in our names and on our behalf in such  capacities  to enable META Group,
Inc. to comply with the  provisions of the  Securities  Exchange Act of 1934, as
amended, and all the requirements of the Securities and Exchange Commission.
<PAGE> 39
      Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant, in the capacities indicated, on the 31st day of March 1999.


        Signature                                  Title(s)
       -----------                                  ----------

/s/ Dale Kutnick                  President, Chief Executive Officer (Principal
---------------------------       Executive Officer) and Co-Research Director  
Dale Kutnick                      


/s/ Bernard F. Denoyer            Senior Vice President-Finance, Chief Financial
---------------------------       Officer, Treasurer and Secretary (Principal 
Bernard F. Denoyer                Financial Officer and Principal Accounting
                                  Officer)


/s/ Marc Butlein                  Director
----------------------------
Marc Butlein


/s/ Francis J. Saldutti           Director
----------------------------
Francis J. Saldutti


                                  Director
----------------------------
Harry S. Gruner


/s/ Michael Simmons               Director
-----------------------------
Michael Simmons


/s/ George C. McNamee             Director
-----------------------------
George C. McNamee


                                  Director
------------------------------
Howard Rubin
<PAGE> F-1
            
                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders
META Group, Inc.
Stamford, Connecticut

         We have audited the  accompanying  consolidated  balance sheets of META
Group,  Inc. and  subsidiary  as of December 31, 1998 and 1997,  and the related
consolidated  statements of income,  changes in stockholders' equity, and cash
flows for each of the three years in the period ended  December  31,  1998.  Our
audits also included the financial  statement  schedule  listed at Item 14(a) 2.
These  financial  statements  and  financial  statement  schedule  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial  statements and financial statement schedule based on
our audits.

         We conducted our audits in accordance with generally  accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

         In our opinion, such consolidated  financial statements present fairly,
in all  material  respects,  the  financial  position  of META Group,  Inc.  and
subsidiary as of December 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the three  years in the period  ended  December
31, 1998 in conformity with generally accepted  accounting  principles.  Also in
our opinion,  such financial statement schedule,  when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.



DELOITTE & TOUCHE LLP

Stamford, Connecticut
February 5, 1999
(March 15, 1999 as to Note 13)
<PAGE> F-2
<TABLE>

                                META GROUP, INC.
                           CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)
<CAPTION>
                                                                  December 31,
                                                               1998         1997
                                                               ----         ----
                                  ASSETS
<S>                                                          <C>        <C>   
Current assets:
   Cash and cash equivalents                                $  9,945    $ 12,910
   Marketable securities                                      21,031      23,700
   Accounts receivable, less allowance for doubtful
     accounts of $1,088 and $828                              35,306      26,302
   Deferred commissions                                        1,436       1,351
   Deferred tax asset                                          3,808       1,490
   Other current assets                                        2,894       1,126
                                                            --------    --------
      Total current assets                                    74,420      66,879
 Marketable securities                                        15,850       4,046
Furniture and equipment, net                                   4,553       2,765
Deferred tax asset                                               792       7,759
Goodwill, net                                                  5,528
Other assets                                                  11,044       8,004
                                                            --------    --------
     Total assets                                           $112,187    $ 89,453
                                                            ========    ========


                      LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
<S>                                                       <C>          <C>

Current liabilities:
   Accounts payable                                     $   1,432     $     974
   Deferred revenues                                       31,276        29,136
   Accrued compensation                                     5,314         2,850
  Other current liabilities                                 1,475         1,093
                                                        ---------     ---------
     Total current liabilities                             39,497        34,053
                                                        ---------     ---------

Commitments and contingencies (See Note 7)

Stockholders' equity:
  Preferred stock, $.01 par value, authorized
    2,000,000 shares; none issued
  Common stock, $.01 par value, authorized
   45,000,000 shares; issued 12,319,377 and
   11,774,856 shares                                          123           118
   Paid-in capital                                         58,443        49,943
   Retained earnings                                       14,444         5,659
  Treasury stock, at cost, 647,016 shares                    (320)         (320)
                                                        ---------     ---------
    Total stockholders' equity                             72,690        55,400
                                                        ---------     ---------
    Total liabilities and stockholders' equity          $ 112,187     $  89,453
                                                        =========     =========

                See notes to consolidated  financial statements.
</TABLE>
<PAGE> F-3
<TABLE>
                                META GROUP, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                      (In thousands, except per share data)

<CAPTION>
                                                        Year Ended December 31,
                                                     1998       1997      1996
                                                     ----       ----      ----
<S>                                                <C>       <C>      <C>
  Revenues:
     Continuous services                           $56,086   $41,805   $30,769
     Other, principally consulting and              16,699     9,390     6,197
       publications                                -------   -------   -------
       Total revenues                               72,785    51,195    36,966
                                                   -------   -------   -------

  Operating expenses:
     Cost of services and fulfillment               35,098    24,602    18,908
     Selling and marketing                          16,702    12,477     8,797
     General and administrative                      6,753     5,006     3,728
     Depreciation and amortization                   1,894     1,501     1,086
                                                   -------   -------   -------
       Total operating expenses                     60,447    43,586    32,519
                                                   -------   -------   -------

  Operating income                                  12,338     7,609     4,447

  Interest income                                    2,621     2,138     1,909
                                                   -------   -------   -------

  Income before provision for income tax            14,959     9,747     6,356

  Provision for income tax                           6,174     3,980     2,730
                                                   -------   -------   -------

  Net income                                       $ 8,785   $ 5,767   $ 3,626
                                                   =======   =======   =======

  Net income per diluted common share              $   .70   $   .48   $   .32
                                                   =======   =======   =======

  Weighted average number of diluted common         12,596    11,937    11,502
     shares outstanding                            =======   =======   =======

  Net income  per basic common share               $   .78   $   .53   $   .41
                                                   =======   =======   =======

  Weighted average number of basic common          11,326    10,821      8,925
     shares outstanding                            =======   =======   =======


            See notes to consolidated  financial statements.
</TABLE>
<PAGE> F-4
<TABLE>
  
                                            META GROUP, INC.
                     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                            (In thousands)
 
<CAPTION>
                                                                                   Retained
                                                      Common Stock        Paid-in   Earnings       Treasury Stock
                                                      ------------                                 --------------
                                        Total       Shares    Amount      Capital   (Deficit)      Shares   Amount
                                        -----       ------    ------      -------   ---------      ------   ------
                                                             
<S>                                    <C>          <C>       <C>       <C>         <C>         <C>      <C>

Balance, January 1, 1996               $31,868        8,881      $ 89     $35,833     $(3,734)     (647)     $(320)
Exercise of stock options                  621        1,241        12         609
Costs related to the IPO                   (33)                               (33)
Issuance of shares under employee
   stock purchase plan                     322           24         1         321
Income tax benefit from stock
   options exercised                     6,324                              6,324
Net income                               3,626                                          3,626
                                       -------      -------      ----     -------     -------       ----      ----
Balance, December 31, 1996              42,728       10,146       102      43,054        (108)      (647)     (320)
Exercise of stock options                  364        1,608        16         348
Issuance of shares under employee
   stock purchase plan                     254           21                   254
Income tax benefit from stock
   options exercised                     6,287                              6,287
Net income                               5,767                                          5,767
                                       -------      -------      ----     -------     -------       ----      ----
Balance, December 31, 1997              55,400       11,775       118      49,943       5,659       (647)     (320)
Exercise of stock options                1,636          328         3       1,633
Issuance of shares under employee
   stock purchase plan                     344           21                   344
Income tax benefit from stock
   options exercised                       984                                984
Sentry acquisition (Note 3)              4,706          195         2       4,704
Sentry warrants (Note 3)                   835                                835
Net income                               8,785                                           8,785
                                      --------       ---         ----     -------     --------      ----      -----
Balance, December 31, 1998            $ 72,690       12,319      $123     $58,443     $ 14,444      (647)     $(320)
                                      ========      =======      ====     =======     ========      ====      =====


                See notes to consolidated  financial statements.
</TABLE>
<PAGE> F-5
<TABLE>
                          META GROUP, INC.
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                          (In thousands)

<CAPTION>
                                                                  Year Ended December 31,
                                                               1998        1997       1996
                                                               ----        ----       ----
<S>                                                          <C>         <C>        <C>   
Operating activities:
Net income                                                 $  8,785    $  5,767    $  3,626
Adjustments to reconcile net income to net cash provided
   by operating activities:
   Depreciation and amortization                              1,894       1,501       1,086
   Provision for doubtful accounts                              260          77         318
   Write-off of equipment                                        40
   Deferred income taxes                                      5,970       3,820       2,682
   Changes in assets and liabilities
     (net of business acquisition):
      Accounts receivable                                    (8,253)     (8,243)     (7,907)
      Deferred commissions                                      (85)        124        (325)
      Other current assets                                     (783)       (645)       (155)
      Other assets                                           (1,077)       (740)       (705)
      Accounts payable                                         (271)        137          (8)
      Accrued compensation and other expenses                   704         144         548
      Deferred revenues                                       2,110       6,251       6,328
                                                           --------    --------    --------

Net cash provided by operating activities                     9,294       8,193       5,488
                                                           --------    --------    --------

Investing activities:
   Capital expenditures                                      (3,177)     (1,908)     (1,748)
   Investment in marketable securities                       (9,135)    (12,062)    (15,684)
   Investments and advances                                  (1,927)     (1,266)     (5,156)
                                                           --------    --------    --------

Net cash used in investing activities                       (14,239)    (15,236)    (22,588)
                                                           --------    --------    --------

Financing activities:
   Costs related to the IPO                                                             (33)
   Proceeds from employee stock purchase plan                   344         254         322
   Proceeds from exercise of stock options                    1,636         364         621
                                                           --------    --------    --------

Net cash provided by financing activities                     1,980         618         910
                                                           --------    --------    --------

Net decrease in cash and cash equivalents                    (2,965)     (6,425)    (16,190)
Cash and cash equivalents at beginning of year               12,910      19,335      35,525
                                                           --------    --------    --------

Cash and cash equivalents at end of year                   $  9,945    $ 12,910    $ 19,335
                                                           ========    ========    ========
Supplemental information:
   Cash paid during the year for income taxes              $    221    $    216    $     48
                                                           ========    ========    ========

                   See notes to consolidated  financial statements.

         During the year ended  December  31,  1998,  the Company  acquired  The
Sentry Group, Inc. for 195,066 shares of common stock valued at $4.7 million and
warrants valued at $835,000.

</TABLE>
<PAGE> F-6
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       Business Description

         META Group, Inc. and its subsidiary, The Sentry Group, Inc. (see Note
3), (collectively the "Company") is an independent  market  assessment  company
providing  research  and  analysis of  developments,  trends and  organizational
issues relating to the computer hardware,  software,  communications and related
information  technology  ("IT")  industries  to IT users  and  vendors.  IT user
organizations  utilize the Company's  research,  analysis and recommendations to
develop and employ  cost-effective and revenue enhancing strategies for
selecting  and  implementing  timely IT solutions  and for  aligning  these
solutions with business  priorities.  IT vendors use the Company's  services for
help in  product  positioning,  marketing  and market  planning,  as well as for
internal IT decision-making.

         The Company's  domestic  revenues are generated by a direct sales force
calling on IT user and vendor  clients.  International  marketing  and sales are
performed by independent sales representative organizations.  Under the terms of
the  Company's  international  sales  representative   agreements,  the  Company
realizes revenues from the international sales  representative  organizations at
rates of 40% to 60% of amounts billed to those clients.

         Revenues  from  international   sales   representative   organizations,
primarily  in  Europe,  accounted  for  approximately  14%,  13%  and 10% of the
Company's total  Continuous  Services  revenues for the years ended December 31,
1998, 1997 and 1996, respectively.

2.       Significant Accounting Policies

         Principles of Consolidation  The consolidated financial statements
include the accounts of META Group, Inc. and The Sentry Group, Inc. since the
date of acquisition.  All significant intercompany balances and transactions
have been eliminated in consolidation.

         Revenue and Commission Expense Recognition Continuous Services revenues
are recognized on a straight-line  basis over the subscription  contract period,
generally one year. All subscription  contracts are billable at signing,  absent
special  terms  granted  on a  limited  basis  from time to time.  As such,  the
Company's  policy is to record at the time of signing of a  Continuous  Services
subscription  contract the fees receivable and related deferred revenues for the
full amount of the subscription  contract.  The Company also records the related
commission  obligation  upon  the  signing  of  the  subscription  contract  and
amortizes the corresponding  deferred  commission  expense over the subscription
period  in which  the  related  Continuous  Services  revenues  are  earned  and
amortized  to  income.  All  subscription  contracts  are  cancelable  only  for
non-performance,   except  for   government   contracts   which  have  a  30-day
cancellation  clause.  Historically,  such cancellations have not been material.
Other  revenues,   consisting  principally  of  consulting,   conferences,   and
publications,  are  recognized  at the time the  related  service is rendered or
product delivered.

         Product  Development  All  costs  incurred  in the  development  of new
products and services are expensed as incurred.
<PAGE> F-7

         Furniture  and  Equipment  Furniture  and  equipment is stated at cost.
Depreciation  is computed  using the  straight-line  method  over the  estimated
useful lives of the respective assets which range from three to seven years.

         Income Taxes  Deferred  income  taxes are  provided  for the  temporary
differences  between the financial  reporting  basis and the income tax basis of
the Company's  assets and  liabilities as measured by the presently  enacted tax
rates.

         Cash  Equivalents and Marketable  Securities Cash and cash  equivalents
include cash on hand and all investments in highly liquid instruments  purchased
with  original  maturities  of three months or less.  Investments  with original
maturities of more than three months are  classified  as marketable  securities.
Marketable  securities  are  considered  "held-to-maturity"  and valued at cost,
which approximates market. The Company intends to hold all marketable securities
investments to maturity.

         Earnings per Share Basic earnings per share is computed by dividing net
income by the weighted  average  number of common  shares  outstanding.  Diluted
earnings per share is computed by dividing  net income by the  weighted  average
number of common  shares  outstanding  and  dilutive  common  equivalent  shares
(common stock options)  outstanding.  Common shares outstanding  includes issued
shares less shares held in treasury for the respective year.

         Concentration   of   Credit   Risk   The   Company   has  no   material
off-balance-sheet   concentration  of  credit  risk  such  as  foreign  exchange
contracts, options contracts or other foreign hedging arrangements.  The Company
invests the majority of its cash balances in short-term, high quality marketable
debt securities, managed by three financial institutions. The Company's accounts
receivable  balances are  primarily  domestic.  No single  client  accounted for
greater  than 2% of  revenues or  represents  a  significant  credit risk to the
Company.

         Fair Value of Financial  Instruments  The carrying amount of all of the
Company's cash and cash  equivalents,  and marketable  securities,  approximates
fair value due to the short-term maturity of those investments.

         Management   Estimates  The  preparation  of  financial  statements  in
conformity with generally accepted accounting  principles requires management to
make estimates and  assumptions  that affect the reported  amounts of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting periods. Actual results could differ from those estimates.

         Goodwill Goodwill consists of the excess of the purchase price over the
fair value of net assets acquired and is being amortized using the straight-line
method over thirty years.
<PAGE> F-8
         Adoption of Financial  Accounting Standards In June 1997, the Financial
Accounting  Standards  Board ("FASB") issued  Statement of Financial  Accounting
Standards No. 130, "Reporting Comprehensive Income," ("SFAS 130,") and Statement
of Financial  Accounting  Standards No. 131 "Disclosures About Segments of an
Enterprise  and  Related  Information,"  ("SFAS  131.") SFAS 130  requires  that
comprehensive  income,  which includes net income as well as certain  changes in
assets and  liabilities  recorded in  stockholders'  equity,  be reported in the
financial  statements.  There were no components of  comprehensive  income other
than net income for the years ended December 31, 1998,  1997, and 1996. SFAS 131
requires  disclosure of certain  information about operating  segments and about
products and services,  geographic areas in which a company operates,  and their
major customers. The Company has incorporated the provisions of SFAS 131 in Note
12.

         Stock Split On April 27,  1998,  the Board of  Directors of the Company
declared a three for two stock split  effected  through the  issuance of a fifty
percent stock dividend payable on June 11, 1998 to shareholders of record on May
22,  1998.  All share and per share  amounts  affected  by this  split  that are
contained  in the  accompanying  consolidated  financial  statements  have  been
retroactively adjusted for all periods presented.

3.       Acquisition

         In October 1998,  the Company  completed the  acquisition of all of the
outstanding capital stock of The Sentry Group, Inc. ("Sentry"), an IT consulting
company,  for an  initial  payment  of  195,066  shares  of  common  stock and a
contingent  payment of up to $7.0 million in common  stock or (at the  Company's
option) cash in the event certain  financial targets are met by Sentry for 1999.
In addition,  the Company issued to Sentry stockholders  warrants to purchase up
to 200,000  shares of the  Company's  common stock at $30.00 per share,  125,000
shares  of which  are  currently  exercisable  and  75,000  shares  of which are
contingently  exercisable upon Sentry  achieving  certain  financial  targets in
1999. The 125,000  warrants  currently  exercisable  expire in October 2002. The
75,000 warrants  contingently  exercisable  expire four years after the date the
Company pays contingent consideration, if any, to the Sentry stockholders 
pursuant to the terms of the acquisition.

         The  fair   value  of  the   noncontingent   consideration,   including
acquisition costs, was $5.9 million. The acquisition was accounted for under the
purchase method and, accordingly, the operations of Sentry have been included in
the consolidated financial statements from the date of acquisition. The purchase
price was allocated to the net assets  acquired based upon their  estimated fair
values.  Such  allocation  resulted in goodwill  of $5.6  million  which will be
amortized over thirty years.  Accumulated  amortization  of goodwill at December
31, 1998 was $37,000.  The fair value of the  contingent  consideration  will be
included in the purchase price upon final resolution of the contingency.

         The  unaudited  pro forma  results of  operations  for the years  ended
December  31, 1998 and 1997 have been set forth below as though the  acquisition
had occurred as of January 1, 1997.
<PAGE> F-9
                           (In thousands, except per share data)
                                  Year Ended December 31,
                                     1998         1997
                                     ----         ----
                                      (Unaudited)

Revenues                          $79,200      $59,365

Income before income taxes         14,745        9,973

Net income                          8,659        5,901

Net income per common
share:
     Diluted                      $   .68        $ .49
     Basic                        $   .75        $ .54


4.       Marketable Securities

         At  December  31,  1998 and  1997,  the  Company  held  investments  in
marketable  securities which were classified as  held-to-maturity;  accordingly,
they are carried at  amortized  cost plus accrued  interest on the  consolidated
balance  sheets.  Net unrealized  gains (losses) have not been recognized in the
consolidated  financial  statements.  Marketable securities at December 31, 1998
and 1997 include the following (in thousands):

<TABLE>

                                                                    December 31, 1998
                                                                   -----------------
                                                                         Gross
                                                                      Unrealized
                                                     Amortized         Holding            Fair
                                                     Cost           Gains (Losses)        Value
<S>                                                 <C>                <C>               <C>    
Discounted commercial paper                          $20,370            $477             $20,847
U.S. government issued mortgage backed bonds          12,000             (97)             11,903
Asset backed securities                                1,850                               1,850
Municipal bonds                                        2,000                               2,000
Accrued interest                                         661                                 661
                                                     -------            -----            -------
                                                     $36,881             $380            $37,261
                                                     =======             ====            =======


                                                                       December 31, 1997
                                                                       -----------------

Discounted commercial paper                           $19,274            $438            $19,712
U.S. government issued mortgage backed bonds            4,997              23              5,020
Corporate bonds                                         2,838             (30)             2,808
Accrued interest                                          637                                637
                                                      -------            ----            -------
                                                      $27,746            $431            $28,177
                                                      =======            ====            =======

The contractual maturities of marketable securities at December 31, 1998 are
as follows:
<PAGE> F-10
                                                                       December 31, 1998
                                                                        -----------------
                                                     Amortized                             Fair
                                                       Cost                                Value
Within one year                                       $20,370                            $20,847
Due after one year through twenty years                14,000                             13,903
Due after twenty years                                  1,850                              1,850
                                                      -------                            -------
                                                      $36,220                            $36,600
                                                      =======                            =======

Actual maturies may differ from contractual maturities because some 
borrowers have the right to call the obligations.
</TABLE>

5.       Furniture and Equipment

         Furniture and equipment consists of the following (in thousands):


                                                             December 31,
                                                             ------------
                                                          1998           1997
                                                          ----           ----

Leasehold improvements                                   $ 399         $  208
Computer equipment, software, and peripherals            7,186          4,809
Furniture and fixtures                                     942            703
                                                        ------         ------
                                                         8,527          5,720
Less: accumulated depreciation and amortization         (3,974)        (2,955)
                                                        ------         ------
                                                        $4,553         $2,765
                                                        ======         ======


          Depreciation and amortization of furniture and equipment was 
$1.8  million,  $1.5 million and $1.1  million for the years ended  December 31,
1998, 1997 and 1996, respectively.

6.       Other Assets

         During the years ended  December  31, 1998 and 1997,  the Company  made
investments  and  advances  to several  companies  in  parallel  or  synergistic
industries. Such investments and advances are summarized below (in thousands):
<PAGE> F-11
<TABLE>

                               December 31, 1998           December 31, 1997
                              -----------------            -----------------
<CAPTION>
                              Investments  Advances       Investments  Advances
                              ----------   --------       ----------    --------
<S>                           <C>       <C>               <C>           <C>    
 
Computerwire, plc.            $1,850                       $1,700
 Computerwire, Inc.                16    $   50                166       $   50
 Spikes Cavell & Co.            2,690                        2,674
 META CXP LLC                      92       200                 83          200
 Market Perspectives Inc.         294                          294
 FirstMatter (SRI)                 45     1,232                 23        1,232        
 Client/Server Labs             1,029
 IMG                              321
 IMT                              529
                               ------    ------             ------       ------
                               $6,866    $1,482             $4,940       $1,482
                               ======    ======             ======       ======
</TABLE>

         In October 1998, the Company invested $500,000 in IMT Strategies, Inc.
("IMT")  in  the  form  of a  loan  represented  by a  secured  promissory  note
convertible at any time into IMT's common stock.  IMT was established to deliver
syndicated research, publications, consulting services, management education and
training focused on the integration of marketing and technology.

         In October 1998,  the Company  invested  $300,000 in Intermedia  Group,
Inc.  ("IMG") in the form of a loan  represented by a senior secured  promissory
note convertible at any time into IMG's common stock. IMG is an integrated media
and conference business established to serve markets in a complementary  fashion
to the Company's main lines or new lines of business.

         In September 1998, the Company made an investment of $1 million
in Client/Server Labs, Inc., a supplier of performance and functional IT testing
services devoted to assessing the performance and viability of IT solutions.

         In November 1997, the Company  advanced $1.3 million to a joint venture
with  SRI  Consulting,  Inc.,  designed  to  deliver  thought-leading  research,
methods,  metrics,  and tools to senior  management  of  global  2000  companies
scenario  planning  for the  future.  SRI  Consulting,  Inc.  is a  wholly-owned
subsidiary of SRI International,  a Silicon Valley based think-tank working with
companies worldwide to identify market  opportunities and develop strategies for
competing in technology-driven markets.

         All of the  investments  listed  above  are for less  than a 20%  stock
ownership  interest in the investee.  As the Company does not exert  significant
influence in of any of the investees,  all  investments are accounted for on the
cost basis.

7.       Commitments and Contingencies

         Lease Commitments:
<PAGE> F-12

         The Company leases office facilities and equipment under  noncancelable
operating leases. Future minimum lease payments relative to these agreements are
as follows (in thousands):

                 Year ending December 31,
                 ------------------------

                 1999                                $2,405
                 2000                                 2,161
                 2001                                 1,684
                 2002                                    43
                                                     ------
                                                     $6,293
                                                     ======

         Total rent expense was $2.0 million,  $1.6 million and $1.3 million for
years ended December 31, 1998, 1997, and 1996, respectively.

         Contingencies:

         The  Company is a party to  certain  legal  proceedings  arising in the
ordinary course of business. The Company believes that none of these proceedings
is likely to have a material adverse effect on the Company's  business,  results
of  operations  or  financial  condition.  Accordingly,  no  provision  for  any
liability has been made in the accompanying consolidated financial statements.

         Guarantees:

         The Company currently  guarantees  certain local bank borrowings of its
independent   sales   representative   organizations   in  Europe  by  extending
irrevocable  letters of credit to local banks,  renewable  annually.  Should the
independent  sales  representative  default  on the  terms  of  their  repayment
obligations  to their bank,  the  Company's  guarantee  would be called upon. At
December 31, 1998 the total of these guarantees is less than $1.5 million
and none exceeds $350,000.

8.       Income Taxes

<TABLE>
The provision for income taxes is as follows (in thousands):
<CAPTION>

                                        Year Ended December 31,
                                        -----------------------
                                         1998     1997     1996
                                       ------   ------   ------
<S>                                    C>      <C>      <C>
Current-state                          $  204   $  160   $   48
                                       ------   ------   ------

Deferred-federal                        4,908    2,866    2,080
        -state                          1,062      954      602
                                       ------   ------   ------
                                        5,970    3,820    2,682
                                       ------   ------   ------

                                       $6,174   $3,980   $2,730
                                       ======   ======   ======
</TABLE>
<PAGE> F-13
     A reconciliation of the income tax provision from the amount computed
using the federal statutory rate is as follows (in thousands):

<TABLE>
<CAPTION>
                                                 Year Ended December 31,
                                              ----------------------------
                                                1998       1997       1996
                                                ----       ----       ----
<S>                                           <C>       <C>        <C>  

Income tax at statutory rate                  $5,086     $3,314     $2,161
State taxes, net of federal benefit            1,007        659        429
Other                                             81          7        140
                                              ------     ------     ------
                                              $6,174     $3,980     $2,730
                                              ======     ======     ======

            The principal  components  of the Company's  deferred tax assets and
(liabilities) are as follows (in thousands):

                                                  December 31,
                                               ----------------
                                                1998       1997
                                               -----     ------
Depreciation and amortization                  $  96     $   74
Accrued liabilities                                       1,157
Allowance for doubtful accounts                  420        336
Capitalization of product development costs       30         35
Net operating loss carryforwards                6,061     8,789
Other                                             135       
                                               ------    ------
Deferred tax asset                              6,742    10,391
   Valuation allowance                         (2,142)   (1,142)
                                               ------   -------
Net deferred tax asset                         $4,600    $9,249
                                               ======   =======
</TABLE>

         During the year ended  December 31,  1998,  the Company  increased  the
valuation  allowance by $1 million to properly reflect the additional  valuation
allowance  related to the deferred tax assets acquired as part of the Sentry 
acquisition.  During the year  ended  December  31,  1997,  the  Company
increased the valuation allowance by $343,000, which represents the tax effect
of the state net operating loss carryforwards generated during the year.

         At December 31, 1998, the Company has net operating loss  carryforwards
for federal income tax purposes of $10.9 million expiring in 2004 through 2010.

         The  exercise of  non-qualified  stock  options  and the  disqualifying
dispositions  of incentive  stock options under the Company's stock option plans
gives rise to  compensation  which is  includable  in the taxable  income of the
recipients  and  deductible  by the Company  for  federal  and state  income tax
purposes.  The tax benefit  recognized  from the  utilization of such deductions
increased paid-in capital by $1.0 million, $6.3 million, and $6.3 million during
the years ended December 31, 1998, 1997, and 1996, respectively.  As of December
31,  1998,  434,389 shares  were  issuable  upon the  exercise  of  outstanding
non-qualified stock options held by employees.
<PAGE> F-14
9.       Stock Option Plans

         The Company's 1995 Non-Employee Director Stock Option Plan, Amended and
Restated  1995 Stock Plan,  1993 Stock Option and  Incentive  Plan,  Amended and
Restated   1989  Stock  Option  Plan  and  Amended  and  Restated   1996  Equity
Compensation Plan of The Sentry Group, Inc., (the "Plans") provide for grants to
employees,  directors and  consultants of incentive  stock options  ("ISOs") and
non-qualified  stock  options  ("NQSOs"),  for the  purchase  of up to  225,000,
4,500,000,  2,400,000,  5,400,000  and 359,500  shares of the  Company's  common
stock,  respectively.  All options were granted at an exercise price of not less
than fair  market  value.  Fair market  value was  determined  by the  Company's
Compensation  Committee.  The Compensation  Committee  determined the date(s) at
which options vest and become exercisable. Upon adoption of the 1995 Stock Plan,
the 1993 Stock  Option and  Incentive  Plan and the 1989 Stock  Option Plan were
terminated, except as to outstanding stock options.
<TABLE>

<CAPTION>
                                                                                               Weighted-Average
                                              Options              Option Price Range          Exercise Price
    <S>                                    <C>                    <C>             <C>           <C> 

     Outstanding January 1, 1996             3,866,146           $  .10     -    $ 7.09         $  .6883

        Granted                                665,055            13.75     -     22.17          15.7512
        Exercised                           (1,241,275)             .10     -     16.50            .5256
        Canceled                              (157,895)             .63     -     17.67           8.1098
                                            ----------           ------          ------           ------
      Outstanding December 31, 1996          3,132,031              .10     -     22.17           3.5771

       Granted                                 792,635            11.83     -     16.50          12.7417
       Exercised                            (1,608,021)             .10     -     15.83            .3616
       Canceled                               (148,928)             .63     -     17.67          12.0209
                                            ----------           ------          ------          -------
      Outstanding December 31, 1997          2,167,717              .10     -     22.17           8.7850

        Granted                              1,332,999            15.58     -     27.44          19.1136
        Exercised                             (327,817)             .10     -     17.67           4.9931
        Canceled                              (232,626)            3.17     -     24.13          17.0729
                                            -----------          ------          ------         --------
      Outstanding December 31, 1998          2,940,273           $  .10     -    $27.44         $13.2346
                                            ==========           ======          ======         ========

      Exercisable:
        December 31, 1998                    1,123,502                                          $ 6.9421
                                            ==========
        December 31, 1997                    1,015,941                                          $ 4.2446
                                            ==========
        December 31, 1996                    2,205,998                                          $  .7674
                                            ==========
</TABLE>
         At December 31, 1998, 302,184 shares were issuable upon the exercise of
outstanding NQSOs. All other stock options outstanding were ISOs.

         In  October  1995,  the  Company  adopted  the 1995  Stock  Plan,  1995
Non-Employee  Director Stock Option Plan, and 1995 Employee Stock Purchase Plan.
Details of the Plans are as follows:

         Amended and Restated  1995 Stock Plan.  The  Company's  1995 Stock Plan
(the "1995  Plan") was adopted by the Board of  Directors on October 2, 1995 and
approved  by the  Company's  stockholders  on  October  4,  1995. The 1995 Plan
<PAGE> F-15
provides  for the  issuance  of a maximum of  4,500,000  shares of common  stock
pursuant to the grant to employees of ISOs and the grant of NQSOs,  stock awards
or  opportunities to make direct purchases of stock in the Company to employees,
consultants, directors and officers of the Company.

         1995  Non-Employee  Director Stock Option Plan.  The 1995  Non-Employee
Director Stock Option Plan (the "Director Option Plan") was adopted by the Board
of Directors on October 2, 1995 and approved by the  Company's  stockholders  on
October 4, 1995.  The  Director  Option Plan  provides for the grant of NQSOs to
purchase a maximum of 225,000 shares of common stock to  non-employee  directors
of the Company.  All options granted under the Director Option Plan will have an
exercise  price  equal to the fair market  value of common  stock on the date of
grant.  The term of each  option will be for a period of ten years from the date
of grant.

         Amended and Restated 1995 Employee Stock Purchase Plan. The Amended and
Restated  1995  Employee  Stock  Purchase  Plan (the "1995  Purchase  Plan") was
adopted by the Board of Directors and approved by the Company's  stockholders on
October 2, 1995.  The 1995  Purchase Plan provides for the issuance of a maximum
of 375,000 shares of common stock  pursuant to the exercise of  non-transferable
options granted to participating employees. The exercise price for the option is
85% of the lesser of the market price of the Company's common stock on the first
or last day of the semi-annual plan period.  During the years ended December 31,
1998 and 1997, the Company issued 21,620 and 20,604 shares, respectively,  under
the 1995 Purchase Plan.

         Amended and Restated 1996 Equity Compensation Plan of The Sentry Group,
Inc. The Amended and Restated 1996 Equity Compensation Plan of The Sentry Group,
Inc. (the "Sentry Plan") was adopted and assumed by the Company  pursuant to the
acquisition  by the Company of Sentry in October 1998.  The Sentry Plan provides
for the issuance of a maximum of 359,500  shares of Common Stock pursuant to the
grant  of  ISOs  to  employees  and  the  grant  of  NQSOs,   stock  awards  and
opportunities  to make  direct  purchases  of stock to  employees,  consultants,
directors  and officers of the  Company.  The terms of such  options,  including
number of shares,  exercise price, duration and vesting are generally determined
by the Compensation Committee.

         The  following  table  summarizes   information   about  stock  options
outstanding at December 31, 1998:
<TABLE>

                                        OPTIONS GRANTED                                 OPTIONS EXERCISED      
                      ------------------------------------------------          --------------------------------

<CAPTION>
                                            WEIGHTED          WEIGHTED                               WEIGHTED
 RANGE OF                 NUMBER            AVERAGE           AVERAGE              NUMBER           AVERAGE
 EXERCISE               OUTSTANDING        REMAINING          EXERCISE           EXERCISABLE        EXERCISE
 PRICES               AS OF 12/31/98         LIFE              PRICE             AS OF 12/31/98     PRICE
<S>                    <C>                   <C>             <C>               <C>                     <C>    
$  .10 - $  .83          303,350             3.06            $  .4985             303,350            $ .4985
  1.33 -   7.09          359,683             4.53              1.9337             359,683             1.9337
 11.83 -  12.33          361,488             8.25             11.8333              83,561            11.8333
 13.02 -  15.17          470,533             7.75             14.4330             196,309            14.5961
 15.58 -  27.44        1,445,219             8.91             18.6807             180,599            17.1574
----------------       ---------             ----            --------           ---------            -------
$  .10 - $27.44        2,940,273             7.50            $13.2346           1,123,502            $6.9421
================       =========             ====            ========           =========            =======

</TABLE>
<PAGE> F-17
         The estimated fair value of options  granted during 1998, 1997 and 1996
was  $10.55,  $6.52 and $8.72  per  share,  respectively.  The  Company  applies
Accounting  Principles  Board  Opinion  No. 25 and  related  interpretations  in
accounting for its stock option and purchase  plans.  No  compensation  cost has
been  recognized  for the Company's  fixed stock option plans and stock purchase
plan.  Had  compensation  cost for the  Company's  stock  option plans and stock
purchase plan been determined  based on fair value at the option grant dates for
awards in accordance  with the  provisions of SFAS 123, the Company's net income
and  earnings per share for the years ended  December  31, 1998,  1997 and 1996,
would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>

Net income applicable to common stockholders:     1998        1997         1996
                                                  ----        ----         ----
<S>                                         <C>          <C>          <C>    
                         As reported            $8,785      $5,767       $3,626
                         Pro forma               5,460       3,867        2,396

Net income per diluted common share:
                         As reported            $  .70      $  .48       $  .32
                         Pro forma                 .43         .32          .21

Net income per basic common share:
                         As reported            $  .78      $  .53       $  .41
                         Pro forma                 .48         .36          .27
</TABLE>

         The fair value of  options  granted  under the  Company's  fixed  stock
option  plans  during  1998,  1997 and 1996 was  estimated on the dates of grant
using   the   Black-Scholes    options-pricing    model   with   the   following
weighted-average  assumptions used:  dividend yield of zero, expected volatility
of  approximately  57%, risk free interest rate of approximately 5% and expected
lives of option grants of approximately  2.5 years. Pro forma  compensation cost
related to shares  purchased  under the 1995  Employee  Stock  Purchase  Plan is
measured  based on the discount from market value.  The effects of applying SFAS
123 in this pro forma disclosure are not indicative of future pro forma effects.

         Long Term Incentive Plan
         
         In July 1998 the Company adopted the META Group, Inc./JMI Long Term
Incentive Compensation Plan (the "Long Term Plan"). The Long Term Plan provides
for the  issuance  of a  maximum  of  1,000  units to key  officers  of the
Company. The total number of units to be granted,  selection of key officers for
participation  in the Long Term Plan,  the number of units to be granted to each
participant,  the  vesting  period  and the  determination  of the value of each
participant's units are generally determined by the Compensation  Committee.  As
of December  31,  1998, a total of 280 units were granted to key officers of the
Company and 720 units were available for future grants.  
<PAGE> F-17
10.      Employee 401(k) Savings Plan

         The Company has a  tax-deferred  employee  401(k) savings plan covering
substantially  all  employees.  Contributions  by the  Company  are  made at the
Company's discretion.  No contributions have been made by the Company under this
plan.

11.      Related Party Transactions

         In July 1998 the Board of  Directors  approved  the META Group, Inc./
JMI Long Term Incentive Compensation  Plan (the "Plan") with a significant
retention feature for key management employees. The Company subscribed for up to
$4.0 million in limited partnership  interests in the JMI Equity Side Fund, L.P.
(the "JMI Fund"), a venture capital fund managed by JMI Associates. The JMI Fund
will  co-invest  along with other  funds  affiliated  with JMI  Associates.  The
Company has agreed to use the potential  returns on the Company's  investment in
the  JMI  Fund to fund  payouts  under the  Plan to key  management  employees.
Contemporaneously with the Company's subscription to the JMI Fund, JMI Partners,
L.P., an affiliate of the JMI Fund, became a full-service client of the Company.
In 1998, the Company received $125,000 from JMI Partners,  L.P. in consideration
of services and  consulting.  Mr. Gruner,  a director of the Company,  is also a
general  partner of JMI Partners,  L.P., the general partner of JMI Equity Fund,
L.P.  and an  affiliate  of JMI  Associates.  Mr.  Gruner does not have a direct
material interest in the JMI Fund. As of December 31, 1998, the Company invested
$634,000 in the JMI Fund which is included in other  assets on the  consolidated
balance sheet.
         
        In March 1995, the Company entered into an exclusive strategic alliance
agreement with First Albany Corporation  ("First Albany"),  a financial services
firm.  The agreement  provides for the  distribution  of the  Company's  written
research and analysis,  in its original  form or as  customized  and expanded by
First Albany, to First Albany's financial services customers, which include many
institutional  investors  who are large IT users.  The  agreement  restricts the
Company  from  marketing  its services to any broker  dealer or  sell-side  firm
offering  services  similar to those  offered by First  Albany.  The  Company is
permitted  to market  and sell  Continuous  Services  to First  Albany  buy-side
customers.  This  agreement is annually  renewable by First  Albany,  subject to
attainment  of  specified  minimum  revenue  targets.   The  Company  recognized
$750,000,  $616,500 and $425,000 in revenues  from this  arrangement  during the
years ended December 31, 1998, 1997, and 1996,  respectively.  First Albany owns
209,500 shares of the Company's common stock as of December 31, 1998.  George C.
McNamee,  a director of the Company,  is also  Chairman  and Co-Chief  Executive
Officer of First Albany.

12.      Segment Reporting

         The Company  adopted SFAS No. 131,  "Disclosures  about  Segments of an
Enterprise and Related Information", during the fourth quarter of 1998. SFAS No.
131 established  standards for reporting information about operating segments in
annual financial  statements and requires  selected  information about operating
segments  in  interim  financial   reports  issued  to  stockholders.   It  also
established  standards for related  disclosures  about products and services and
<PAGE> F-18
geographic areas.  Operating segments are defined as components of an enterprise
about which  separate  financial  information  is  available  that is  evaluated
regularly by the chief  operating  decision  maker, or decision making group, in
deciding how to allocate resources and in assessing  performance.  The Company's
chief  operating  decision  making group is the  Executive  Committee,  which is
comprised  of the  President  and the  executive  officers of the  Company.  The
operating  segments  are  managed  separately  because  each  operating  segment
represents a strategic business unit that offers different products/services and
serves different clients.

         The  Company's  operating  segments  consist  of  Continuous  Services,
Consulting and Publications.  Continuous Services provide comprehensive coverage
of virtually  all relevant IT and business related  issues faced by its clients
through client/analyst interaction and published conclusions and recommendations
to the client's  specific IT requirements.  Consulting  provides  traditional IT
consulting in selected areas as well as custom  consulting  services tailored to
meet  individual  client   requirements.   Publications   offers  a  variety  of
topic-specific  publications  designed  to  serve  both  as  complements  to the
Company's  core  services and as  stand-alone  deliverables  that meet  specific
assessment requirements.

        The accounting  policies of the operating segments are the same as those
described  in Note 2 except  that the  disaggregated  financial  results for the
Company's  operating  segments have been prepared  using a management  approach,
which is consistent with the basis and manner in which the Company's  management
internally  disaggregates financial information for the purposes of assisting in
making internal operating decisions.  The Company evaluates performance based on
stand alone  segment  operating  income,  defined as the segment  revenues  less
segment  cost of sales and  corporate  general and  administrative  allocations.
Management does not allocate  corporate assets,  non-operating  income (interest
income), or income taxes when measuring segment results.

Information by operating segment is set forth below (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31, 1998
                                     Continuous                                           Consolidated
                                      Services         Consulting      Publications          Total
                                      --------         ----------      ------------          -----
<S>                                  <C>               <C>              <C>                <C>  
Revenues                             $58,485    (1)     $9,650           $4,650            $ 72,785
Operating income                      10,666             1,554              118              12,338
Assets                                                                                      112,187

Year Ended December 31, 1997

Revenues                             $ 43,810   (1)     $5,214           $2,171            $ 51,195
Operating income                        7,060              330              219               7,609
Assets                                   -                -                 -                89,453

Year Ended December 31, 1996

Revenues                             $ 32,808   (1)     $3,714            $ 444            $ 36,966
Operating income                        4,997               71             (621)              4,447
Assets                                   -                -                 -                70,171

<PAGE> F-19
(1)  Included  in the above  Continuous  Services  revenues  for the years ended
December 31, 1998,  1997 and 1996, are analyst  consulting  and conference  fees
associated with retainer  services of $5,637,  $2,808 and $2,039,  respectively,
offset by subscription publications of $3,238, $803 and $0, respectively,  which
are included in Continuous  Services on the face of the consolidated  statements
of income, categorized as Publication revenues for management purposes.
</TABLE>
International operations:

         The Company sells its products  internationally through a network of 30
independent sales representative  organizations  located primarily in Canada and
Europe.  For each of the three years in the period ended  December 31, 1998, net
sales to international  sales  representatives  were $7,636,  $5,422 and $3,097,
respectively.

13.      Subsequent Event

         On March 15,  1999 the Company  entered  into an  agreement  to
     invest  $2.7  million  in META  Security  Group,  an  independent  start-up
consulting  firm.  META Security Group offers security  consulting  services and
hands-on  operational  support  services  including  threats  and  vulnerability
assessments,  policy and standards development,  network monitoring services and
technical research and development.

14.      Selected Quarterly Financial Data (Unaudited)

         The  following   table  sets  forth   certain  key  interim   financial
information for the years ended December 31, 1998 and 1997.
<TABLE>
<CAPTION>
                                                           First        Second        Third        Fourth
                                                          Quarter       Quarter      Quarter       Quarter
                                                      (In thousands, except per share amounts)
<S>                                                      <C>          <C>          <C>            <C>    
1998:
Revenues:
    Continuous services                                  $12,972       $13,347       $14,126       $15,641
    Other, principally consulting and publications         2,170         3,113         4,328         7,088
                                                         -------       -------       -------       -------       
       Total revenues                                     15,142        16,460        18,454        22,729
                                                         -------       -------       -------       -------       
Operating expenses:
    Cost of services and fulfillment                       7,538         7,857         8,675        11,028
      Selling and marketing                                3,446         4,050         4,270         4,936
      General and administrative                           1,520         1,437         1,764         2,032
      Depreciation and amortization                          447           453           458           536
                                                         -------       -------       -------       -------       
           Total operating expenses                       12,951        13,797        15,167        18,532
                                                         -------       -------       -------       -------       
Operating income                                           2,191         2,663         3,287         4,197
                                                         -------       -------       -------       -------       
Net income                                               $ 1,648       $ 1,967       $ 2,356       $ 2,814
                                                         =======       =======       =======       =======       
Net income per diluted common share                      $   .13       $   .16       $   .19       $   .22
                                                         =======       =======       =======       =======       
Net income per basic common share                        $   .15       $   .17       $   .21       $   .24
                                                         =======       =======       =======       =======       
<PAGE> F-20
1997:
Revenues:
     Continuous services                                 $ 9,172       $ 9,846       $10,713       $12,074
     Other, principally consulting and publications        1,639         1,892         2,705         3,154
                                                         -------       -------       -------       -------      
        Total revenues                                    10,811        11,738        13,418        15,228
                                                         -------       -------       -------       -------       
Operating expenses:
     Cost of services and fulfillment                      5,532         5,838         6,344         6,888
     Selling and marketing                                 2,341         2,770         3,469         3,897
     General and administrative                            1,158         1,199         1,279         1,370
     Depreciation and amortization                           333           366           391           411
                                                         -------       -------       -------       -------
            Total operating expenses                       9,364        10,173        11,483        12,566
                                                         -------        -------       -------       -------       
Operating income                                           1,447         1,565         1,935         2,662
                                                         -------       -------       -------       -------       
Net income                                               $ 1,107       $ 1,198       $ 1,570       $ 1,892
                                                         =======       =======       =======       =======       
Net income per diluted common share                      $   .09       $   .10       $   .13       $   .16
                                                         =======       =======       =======       =======
Net income per basic common share                        $   .11       $   .11       $   .14       $   .17
                                                        =======       =======       =======       -------
                                                                                          
</TABLE>

         The total of  quarterly  earnings  per  share may not equal the  annual
amount as earnings per share is calculated independently for each quarter.


<PAGE> S-1

<TABLE>
                                                                    SCHEDULE II

                                META GROUP, INC.

                        VALUATION AND QUALIFYING ACCOUNTS
                                 (In thousands)



<CAPTION>
                                                                      Additions
                                                            ---------------------------
                                                             Charged          Charged
                                            Balance at    (Credited) to    (Credited) to                     Balance
                                           Beginning of     Costs and          Other                         at End
                                              Period        Expenses         Accounts       Deductions      of Period
<S>                                          <C>            <C>             <C>             <C>             <C>

Year ended December 31, 1998:
   Allowance for doubtful accounts            $  828         $260                                           $1,088
                                              ------         ----                                           ------   
   Valuation allowance for deferred tax
     asset                                    $1,142                        $1,000(a)                      $2,142
                                              ------                        -------                         ------

Year ended December 31, 1997:
   Allowance for doubtful accounts            $  751         $ 77                                           $  828
                                              ------         ----                                           ------
   Valuation allowance for deferred tax
     asset                                    $  849         $343                          $50              $1,142
                                              ------         ----                          ---              ------

Year ended December 31, 1996:
   Allowance for doubtful accounts            $  433         $318                                           $  751
                                              ------         ----                                           ------
   Valuation allowance for deferred tax
     asset                                    $  455         $394                                           $  849
                                              ------         ----                                           ------




(a) Reflects the additional allowance related to the deferred tax assets 
acquired as part of the acqusition of The Sentry Group, Inc.
</TABLE>

<PAGE> 

                                META GROUP, INC.
                     INDEX TO EXHIBITS FILED WITH FORM 10-K
                          YEAR ENDED DECEMBER 31, 1998


------------------------------------------------------------------------------
Exhibit
Number                             Description

------------   ------------------------------------------------------------
 2.1(1)(2)     Agreement and Plan of Merger by and among META Group,  Inc., MG 
               Acquisition  Corporation  and The Sentry Group, Inc. dated as of
               September 23, 1998 ("Agreement and Plan of Merger")

 2.2(1)        Amendment No. 1 to Agreement and Plan of Merger

 3.1(3)        Amended and Restated Certificate of Incorporation of the Company

 3.2(3)        Amended and Restated By-Laws of the Company

 4.1(3)        Specimen certificate representing the Common Stock

 4.2(1)        Registration  Rights Agreement dated as of October 20, 1998 by 
               and among META Group, Inc. and the stockholders of The Sentry
               Group, Inc. listed on the signature pages thereto

 4.3(1)        Escrow  Agreement  dated as of October 20, 1998 among META Group,
               Inc., Peter A. Naber and State Street Bank and Trust Company

 4.4(6)        Form of Common Stock Purchase  Warrant (Immediate Vesting)issued 
               to stockholders of The Sentry Group, Inc. on October 20, 1998

 4.5(6)        Form of Common Stock Purchase Warrant(Contingent Vesting)issued 
               to stockholders of The Sentry Group, Inc. on October 20, 1998

 10.1(7)*      Amended and Restated 1995 Stock Plan
 10.2(4)*      Form of Incentive  Stock Option  Agreement under the Amended and
               Restated 1995 Stock Plan

 10.3(4)*      Form of Non-Qualified Stock Option Agreement under the Amended
               and Restated 1995 Stock Plan

 10.4(5)*      1995 Employee Stock Purchase Plan Enrollment Authorization Form

 10.5(3)*      1995 Non-Employee Director Stock Option Plan

 10.6(4)*      Form of Non-Qualified  Stock Option Agreement under the 1995 
               Non-Employee Director Stock Option Plan of the Registrant

 10.7(3)(2)*   Agreement between First Albany Corporation and the Company dated
               March 30, 1995
<PAGE>
 Exhibit
 Number                             Description

 ----------    -----------------------------------------------------------
 10.8(3)*      Restated and Amended 1989 Stock Option Plan, as amended

 10.9(3)*     Form of Incentive Stock Option Agreement under 1989 Stock Option
               Incentive Plan

 10.10(3)*     Form of  Certificate  and Agreement  under Restated and Amended
               1989 Stock Option Plan

 10.11(3)*     1993 Stock Option and Incentive Plan, as amended

 10.12(3)*     Form of Certificate and Agreement under 1993 Stock Option and
               Incentive Plan

 10.13(3)*     Form of Warrant under the Restated and Amended 1989 Stock Option 
               Plan and 1993 Stock Option and Incentive Plan

 10.14(3)      Form of International Sales Representative Agreement

 10.15(3)      Office Lease between International Business Machines Corporation
               and the Company dated August 1, 1994

 10.16(6)*     Form of META Group, Inc./JMI Long Term Incentive Compensation
               Plan

 10.17(7)*     Amended and Restated 1996 Equity Compensation Plan of The Sentry
               Group, Inc.

 11.1+         Statement re computation of per share earnings

 21.1+         List of Subsidiaries

 23.1+         Consent of Deloitte & Touche LLP

 24.1+         Power of Attorney (see page 31)

 27.1+         Financial Data Schedule

 ----------------
     (1)  Incorporated herein by reference to the exhibits to the Company's
          Current Report on Form 8-K dated October 20, 1998 and filed on
          November 3, 1998 (File No. 0-27280).
     (2)  Confidential treatment obtained as to certain portions.
     (3)  Incorporated herein by reference to the exhibits to the Company's 
          Registration Statement on Form S-1(File No. 33-97848).
     (4)  Incorporated herein by reference to the exhibits to the Company's 
          Registration Statement on Form S-8 (File No. 333-1854).
     (5)  Incorporated herein by reference to the exhibits to the Company's 
          Registration Statement on form  S-8 (File No. 33-80539).
     (6)  Incorporated herein by reference to the exhibits to the Company's 
          Quarterly Report on Form 10-Q dated November 16, 1998
          (File No. 0-27280).
     (7)  Incorporated herein by reference to the exhibits to the Company's
          Registration Statement on Form S-8 (File No. 333-68323).

      *   Indicates a management contract or any compensatory plan, contract 
          or arrangement.
      +   Filed herewith.

<PAGE>
<TABLE>

                                                              EXHIBIT 11.1
                                                                                                                        
                                META GROUP, INC.

                      EXHIBIT TO ANNUAL REPORT ON FORM 10-K

                   Computation of Net Income Per Common Share

<CAPTION>

                                                           Year Ended             Year Ended           Year Ended
                                                        December 31, 1998     December 31, 1997     December 31, 1996
                                                        -----------------     -----------------    -----------------
<S>                                                        <C>                    <C>                 <C>   
Net income                                                $ 8,785,000            $ 5,767,000         $ 3,626,000
                                                           ==========            ===========         ===========

Weighted average number of common and common
  equivalent shares outstanding:

      Average number of common shares
        outstanding during the year                        11,326,228             10,821,648          8,925,700

      Add common share equivalents -- options
        to purchase common shares                           1,269,986              1,114,738           2,575,917
                                                          -----------            ----------          -----------

                                                           12,596,214             11,936,386          11,501,617
                                                          ===========            ===========         ===========

Net income per diluted common share                       $       .70            $       .48         $       .32
                                                          ===========            ===========         ===========

Net income per basic common share                         $       .78            $       .53         $       .41
                                                          ===========            ===========         ===========


All share and per share amounts have been retroactively adjusted for the three
for two stock split in 1998.

</TABLE>

<PAGE> 
                                                                 EXHIBIT 21.1

   Subsidiaries of META Group, Inc.

   The Sentry Group, Inc.- incorporated in the Commonwealth of Massachusetts.
   MG (Bermuda) Ltd. incorporated in Bermuda.




                        INDEPENDENT AUDITORS' CONSENT
                        -----------------------------




We  consent  to the  incorporation  by  reference  in  META  Group,  Inc.'s
Registration  Statements Nos. 33-80539,  333-1854 and 333-68323 on Form S-8,and
No. 333-67557 on Form S-3 of our report dated February 5, 1999 (March 15, 1999
as to Note 13) and appearing on page F-1 of the Annual Report on Form 10-K for
the year ended December 31, 1998.




    DELOITTE & TOUCHE LLP

    Stamford, Connecticut
    March 30, 1999